Furniture Chain Relies On Independent Dealers

TAMPA - If a company looks like a corporation and sounds like a franchise, but it’s not, exactly what has kept Badcock Furniture in business for more than 100 years?

Try a dealership.

This business model associated with car dealers and old-time gas stations is the heart of the Mulberry company now called Badcock Home Furniture and More. Today, more than 270 of the 318 stores sell their couches, beds and appliances via a dealership agreement between the home office and an independent dealer.

In its most basic form, a dealer selects company-owned inventory to sell in a dealer-owned or -leased building that bears the company name. In exchange for this consignmentlike arrangement, the dealer gets a portion of the store sales.

That differs from a franchise, a legal agreement involving a particular trademark. Those contracts often dictate the look, inventory and business operating system, but also involve the franchisee receiving a portion of sales.

Badcock Chief Executive and President Don Marks, who once spent his days running franchise operations such as McDonald’s Corp. and PepsiCo, sees plenty of distinctions.

He sees dealerships as the key to Badcock’s strategic plan that’s now pushing into its eighth state, Virginia, and hopes to add 12 stores a year. The plan offsets a recent announcement that Badcock will outsource its Mulberry mattress-building operation.

Badcock’s dealership model has weathered recent corporate changes, specifically a new brand image that asked dealers to invest in remodeling. The stores that remodeled saw sales bump nearly 30 percent the next year. Overall, annual same store sales are increasing 6 percent to 7 percent a year.

Marks recently identified several key issues involved in operating within a dealership model.

Defining roles: At Badcock, the company provides the inventory, market research and the important credit financing program that handles nearly 70 percent of sales. A 20,000-square-foot store holds about $600,000 in inventory, Marks said.

In turn, dealers shell out the money (possibly several hundred thousand dollars) for the building or rent and handle all the associated costs with their in-store staff.

The payoff for dealers: 25 percent of all receipts - including interest tied to credit sales - and clear-cut ownership in real estate if they own the building.

“When they retire, they sell the business and they sell the building, and it’s their return and their retirement,” Marks said.

Playing off strengths: As one of the nation’s 100 largest furniture companies, according to Furniture Today, Badcock focuses on controlling costs via its buying and distribution systems. Dealers focus on knowing the market to increase sales.

“We see that as a real positive,” Marks said.

“Our dealers go to church with their customers. They go to school with their customers. They sponsor Little League teams.”

Accepting some lack of control: In exchange for increased sales, Marks understands he can’t dictate every part of dealer store operations.

For example, he expects that as many as two dozen older dealerships may not agree with or invest in the conversion to Badcock and More stores.

“The biggest headache is that you have to sell and not tell. You’ve got folks who are independent business people. They get to make decisions,” he said.

“You don’t want to say here’s what you’re going to do and here’s how to do it. You don’t want to do that with company people, either, but it is easier to say here’s the new policy and we’re all going to follow it.”

Proving a point: Dealers will invest only if they see a commitment from the corporate side, Marks said. It’s important that there be some company-run stores and that those revenue figures are shared with dealers to show accountability, he said.

“If we have 40 stores and we do something wrong and make a mistake, we’re going to feel the pain much more than any dealer,” he said.

“So we probably won’t make those mistakes as often. I think it’s probably healthy for the dealers for us to have some company stores.”

One of the company’s newest dealers said the dealership model provides more training and business financial planning than a franchise operation. Bessie Whiteside, who owns a Clayton, Ga., dealership with her husband, John, said they felt adrift when they previously ran a furniture franchise.

Badcock’s model offered them advance business planning and provides ongoing training. She also likes that the company splits marketing costs 50-50.

“They don’t just throw you out there. The training is phenomenal,” she said.

Tribune photo by JIM REED

Don Marks, Badcock’s chief executive and president, says “it’s probably healthy for the dealers” that the company shows its commitment by running some of the stores and thus will “feel the pain” of corporate mistakes.

Tribune photo by GREG FIGHT; Tribune illustration by DAVID WILLIAMS

Independent owners of more than 270 Badcock stores sell merchandise for the Mulberry company and get to keep 25 percent of all receipts. Some of the older stores opted not to invest in the conversion to the new name.