Dale Frederick, owner of 13 Bargain Center locations, runs his business with a friendly small-town approach that has earned him some of the highest retention and keep rates in the industry.

Dale Frederick, Owner, Bargain Center.

Jay Oklahoma Bargain Center team - left to right - Tracy Petersen, Account Manager; Dale Frederick, Owner of bargain Center; Nora Pinto, Sales Associate; Glinda Guthrie, Store Manager.

Dale Frederick really wants his customers to own their merchandise. The 53-year old owner of rental stores located in Oklahoma (6), Kansas (6) and Arkansas (1) even says so right in his company’s Mission Statement:

To aggressively assist our customers in their goal of ownership and provide them with more value for their rental dollar than any other rent to own store

“If you take the word aggressive out, it changes the meaning of the entire Mission Statement,” said Frederick. “We have lost if we pick up a customer. Do we pick up customers? Yes, it’s the nature of this business that there is no long-term obligation. But if our customer wants to own their merchandise it is our duty to assist them in whatever way we can.”

Frederick’s store managers are trained to look at late payments in a different light, which may explain how he consistently tracks a 40% keep rate in his stores.

“A lot of people think when a customer misses a payment the problem is that the payment wasn’t made. But that’s never the problem. Something else has happened in that customer’s life. They may have lost their job, or experienced an illness, or had car problems. We train Bargain Center employees to go out to the customer, visit with them, and find out what has happened in their life. I want our customers to get something in return for their rental payments. We have a reputation for helping people when no one else would. It makes for extremely loyal customers because we take the ‘aggressive’ part of our mission statement very seriously.”

There is no arguing that Bargain Center customers are loyal customers. One of the four key numbers Frederick monitors on a daily basis is percent of paid out customers.

“There are four basic numbers I check: customer count, average monthly customer yield, retention, and percent of paid out customers. The most important number to me is percent of paid out customers, or how many of our current customers have previously acquired ownership from us. We strive to see 50% or more at a mature location. This, more than any other number, tells us the quality of our customers’ experience with Bargain Center at a particular location.”

Frederick says while customer count varies by store, average monthly customer yield ranges from $160 to $180 in each location.

“So many rental stores have the mentality of rent it out and pick it up. But I have learned that the fastest way to grow a store is not to lose what you already have. We want to get that customer to own their merchandise and we will set flexible payment schedules – weekly, bi-weekly, semi-monthly or monthly – that fit the income pattern of each individual customer.”

Because of Bargain Center’s unique operating philosophy, there is a certain personality that Frederick is looks for when he personally interviews potential employees.

“It takes a special staff to run things the way I want them to be run. More than anything, I want to see someone with personality. I am looking for someone who is happy, has a sense of humor, and is honest and has integrity. I am not looking for the sharpest knife in the drawer. I can train and teach them the ropes. What I want is a person who will be able to visit with customers because they are becoming part of their community and part of their customers’ lives when they join Bargain Center.”

Not to be overlooked, the Bargain Center employees have a Mission Statement of their own:

We are committed to providing our employees a stable work environment with equal opportunity for learning and personal growth. Above all, employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Bargain Center Customer.

The customer first philosophy has helped Bargain Center grow from one location in 1994 to 13 today, with two more stores to be added during 2008.

Frederick has mainly expanded by opening new stores, but he has purchased two stores throughout the years with mixed results.

“We purchased one a few years back and it didn’t work. We recently bought another store and we’re making it work. But for Dale Frederick, I’d much rather start from the ground up and bring in my own staff and train them and our customers on our way of doing business.”

“Our first goal was just to reach 10 stores, which we did. The next goal is to get to 20 stores, which is a mark we should reach easily. Then, at that point, we will stop and readjust our goals for the future. Just don’t tell Brenda.”

Brenda is Frederick’s wife and Bargain Center’s Vice President. “Just don’t tell Brenda” is a running joke around Bargain Center referring to Dale’s penchant for forging ahead without always running things past his main partner.

Bargain Center is a true family-operated business, with two of the Frederick’s children, two grandchildren and a son-in-law all employed by the company. Which is only fitting, since during the early 1970’s it was Dale Frederick’s father Joe who first introduced Dale to the RTO concept.

“My father was in the used furniture and then the new furniture business in Coffeyville, Kansas. There was a sales rep named Bob Roberts from Tulsa, Oklahoma who would come around and he got my dad interested in this new concept of renting televisions. So my father rented 19” black and white sets and 25” color portable TV’s. He never got deep into it, but I delivered for him and ran some collections while I was still going to school.”

It was later in Coffeyville, Kansas that Frederick opened the first Bargain Center back in 1994 after spending much of his career in the manufacturing industry. It was a career change he was willing to take to settle his entrepreneurial spirit. But in hindsight, the risk was greater than he ever imagined.

“It probably sounds easier than it was, but we sold assets and pooled all of our money to get into this business. If it wouldn’t have been for our banker, we wouldn’t be here today. I took a loan which I thought was the appropriate amount in September of 1994 and by mid October we were broke. They loaned us another amount which I was certain would be enough and by December we were broke again. Merchandise just flew off the floor. Why they kept loaning us money I have no earthly idea, since we didn’t have the assets to back it up. Thankfully the banker had confidence in the reputation of me and my wife and needless to say he is still our banker today. So I guess there is a certain niceness to being stupid. If I’d have had any idea back then what it would really take to do this, it would have scared the living daylights out of me.”

Frederick credits Bob Roberts with giving him valuable training during those early days that he still carries with him today.

“Bob let me work in his store for a month learning the ropes and he introduced me to the vendors that I needed to know. I’d say for the next two years I called him daily with questions about how to handle certain situations. He explained to me the importance of saving the customer’s business and helping them acquire ownership. What we do today is the very foundation of what he taught me.”

Frederick has made an effort to help another entrepreneur succeed, much in the way Roberts helped him.

“I’ve had several people come and visit me and sit in my office and want to get into this business. I let them know that it takes a tremendous amount of capital. You need to have $300,000 - $500,000 cash available, based on the size of store you’re opening, so you can sustain your growth. And you need to be ready to work yourself seven days a week to start out. Maybe there are some geniuses that can do this just from 9 to 5, but I couldn’t do it. I was delivery driver, account manager, and I opened the store in the morning and I closed it at night. And I also tell them not to plan on taking a salary for awhile, because you need to be investing in the business.”

Frederick has learned other lessons over the past 14 years, including bigger is sometimes better.

“One of the best decisions we made was to move our original 1,600 square foot store into an 8,125 square foot space. Our customers love the larger selection of merchandise and we have more than made up for the increase in expenditures with an increase in business.”

Furniture is the most important product category in the Bargain Center chain, with more than 50% of revenues coming from the rental of furniture items. The remaining 50% is split pretty evenly between appliances and electronics.

“We place a lot of emphasis on keeping the stores clean and well arranged. I always say you don’t get a second chance to make a first impression, and we want there to be a temptation for the customer every time they come in the store.”

Thanks to Bargain Center’s emphasis on aggressively helping the customer acquire ownership, large national chains moving into their small markets has had little effect.

“When Aaron’s or Rent-A-Center (RCII) comes to town, we don’t do anything different. We don’t flood the area with circulars, and we don’t lower our rates. You always feel the effect at first, but we know through experience that our customers always come back. We’re not going to lose customers unless we do a poor job servicing them and we’re just not going to do that.”

So has Frederick considered following the lead of many larger companies by changing the name on his Bargain Center signs from “rent-to-own” to “lease-to-own”?

“Rent-to-own is something I am very proud of and when you take the time to explain the concept to a customer they understand it just fine. The way I look at it is rent-to-own is the lady that brought me to the dance. And you have to dance with her.”

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