IN THE CORPORATE BOARDROOM AT AARON RENTS Inc., an old folding chair shines in a glass case like a million-dollar piece of art. Emblazoned with an Aaron Rents sticker on its back, the relic was discovered at a barn auction in Georgia. It's part of the original inventory R. Charles (Charlie) Loudermilk Sr. rented when he founded the company in 1955.
The stature given this basic commodity symbolizes the history that drives the $240 million Atlanta institution. In its hometown, the Aaron name is as recognizable as (Coca-Cola.
For most of its 40 years, the furniture, electronics, and appliance rental company flourished with corporate stores. But in 1992, Loudermilk made a tough decision: He hesitantly turned to franchising in order to allow his company to grow further. For this Atlanta powerbroker, the very idea of abdicating control was heartrending. Protective of the company's stellar reputation, he didn't want to chance tarnishing it. The risk of losing what he had built was enormous.
The restructuring of this old-line company illustrates how an entrepreneur can implement a franchising strategy without losing sight of his company's past and his vision for the future.
DISCOVERING THE RENTAL MARKET
It's easy to understand Loudermilk's hesitancy to launch into franchising when one hears him talk about the company's origins. The gray-haired Loudermilk's eyes glitter with pride. His voice gets animated, revealing his excitement. It sounds as though he's telling the story for the first time, yet he can likely recite it in his sleep.
At 26 years old, he had put an ad in the Yellow Pages to rent "almost everything." He borrowed $500 from a local bank; a pots-and-pans salesman contributed $500. They bought 300 used Army surplus chairs and rented them for 10 cents each a day. Loudermilk's partner quickly bailed out. Loudermilk opened a tiny store in Atlanta. He listened to customers and expanded inventory to include chafing dishes, china, tents, and sickroom supplies. He opened more stores, captured in black-andwhite snapshots on the was.
"I thought if I did $1 million, it would be the end of the world," says the chairman and CEO. The core rental division now has 110 company stores.
About eight years ago, Loudermilk "wanted to find another horse to ride." He saw the emerging rent-to-own concept as the wave of the future. Customers can own necessities and luxuries--even diamond rings--at the end of a payment plan or return them beforehand. In 1988, Loudermilk opened rental purchase boutiques in several rental showrooms. By 1992, the company had 19 rental purchase stores. Loudermilk decided he wanted to build a national chain.
But, because of its long-term payment plans, the rental business is management intensive. Aaron grew via company stores only as fast as its ability to find good managers. To grow at the rate he wanted, Loudermilk turned to franchising "out of necessity."
For years, he held the business close to his vest. The company went public in 1982; Loudermilk owns 59 percent of voting shares and 20 percent...