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Cover Story
The Vision
Budget Blinds has a goal and a plan to achieve it. The only question
seems to be who will join them.
Story By Howard Shingle
In 1992 five young men from Orange County, California each kicked
in $5,000 and started a business selling custom blinds. The business
had a catchy name, Budget Blinds; five employees; and $25,000.
The money went to purchase four white vans and $5,000 in printed
advertising flyers.
Their timing couldn’t have been worse. That same year Orange County, their
home turf, filed for bankruptcy. Yet, by sheer effort—knocking on doors,
handing out flyers and doing the “grunt work” too many people aren’t
willing to do—by its third month in business Budget Blinds was doing more
than $100,000 a month at 50 percent gross profit.
Within two years of its startup the company faced a momentous decision: continue
selling blinds or start selling franchises. The owners decided on franchises.
And now Budget Blinds had a vision.
Budget
Blinds
The vision was to teach franchise owners how to sell custom window
coverings and to start being successful their first week in business.
The vision was to
become the market leader by targeting their franchise territories and shaping
them to specific parameters. With some 362 franchises sold to date, and going
at a rate of about 12 a month, the company looks to add 140 to 200 more franchises
this year.
In 2002, this business generated just over $60 million in sales and Budget
Blinds’ suppliers
tell them they are the No. 6 leading window coverings retailer in the United
States.
The five young men are Chad Hallock, Brent Hallock, Tony Forbes, Todd Jackson
and David Lewis. It was a strange set of circumstances that brought them together.
Let’s just say they once all worked together in a similar blinds business
with similar franchise aspirations.
Infighting and a corporate takeover left Chad Hallock without a job and with
very little money. He reasoned, “I’ve taught other people how to
do this business—because I did all of the marketing and the majority of
the training for these [other] franchisees—I guess it’s time I’ve
got to go do it for myself.”
Hallock came up with the name Budget Blinds and went out to gather up all the
other guys with whom he wanted to surround himself. “Luckily for me they
all said ‘Yeah, we’ll all leave and we’ll all do this,” he
says.
As suggested earlier, none of the five had deep pockets. But they had knowledge,
experience, the right contacts and this vision.
DIVIDE AND CONQUER
Budget Blind’s vision is to have 2,000 franchises in the United States—no
more, no less. It is a very specific goal derived from precise reasoning.
“The United States has 100 million households. We sell territories that
are on average roughly 32,000 households big,” Hallock explains. “Part
of our plan was not to build a territory around every individual who is interested
in a franchise so that the United States gets cherry-picked. Instead, let’s
make all the territories as close as we can to equal opportunity territories,
which means if you’ve done the research we’ve done and looked at
the United States the way we have, you’d find about 35 percent of the United
States can’t be made into a franchise territory based on waste factors:
low demographics, amounts being purchased in the home, expendable income, all
those factors. We ended up taking the 65 million households left over and that’s
what we’ve built into our program.”
When those 65 million households are divided into 32,000-household territories,
you end up with 2,000 territories across the United States. A territory of
32,000 households is not very large. Actually, it’s fairly small, but
the territories are grouped into designated marketing areas (DMA), which Budget
Blinds has pinpointed
through its research, and the vision is based on each DMA being completely
sold out.
“We sell smaller territories than most franchise organizations and far
smaller territories than other franchises in our business, we think, to the betterment
of the franchise owner. We believe that’s the key to success,” says
Hallock.
“The smaller territory, the way we’ve done it, is built on the premise
of having franchisees contiguous all the way around it in exclusive territories
working together as a synergistic group. That makes far more profit, far more
revenues going deep within a territory versus spreading these franchisees out
so wide and thin and setting it up on a foundation that, I believe, opens it
up for someone to come in and take it away from them.”
SYNERGY
The key to Budget Blind’s success is synergy based on each DMA being completely
sold out. Once that’s done, simple math takes over and the DMA becomes
a self-perpetuating enterprise.
Each Budget Blind franchise is contracted to contribute $150 per month into
a national advertising fund (NAF). When it reaches a target level of business
the
NAF is waived, but the franchise is then committed to $1,500 a month for local
advertising. If the DMA is not sold out, that $1,500 is used for local grassroots
advertising—the sorts of things that got Budget Blinds going in the first
place. If it is sold out, then big things start to happen.
Take a DMA with 36 territories of 32,000 households each. Each franchise puts
in $1,500 a month for local advertising. That’s $54,000 a month, or $648,000
a year. On an individual basis, each franchise owner spends $18,000 a year on
advertising, but gets the benefits of a $648,000 television campaign. It’s
the most localized way to purchase broadcast television. “That becomes
critical,” Hallock says.
“We’re taking advantage of the fact that the window coverings industry
is the most fragmented industry in the marketplace—less than 25 percent
of this market is taken by the top 10 retailers. We’re taking those mom-and-pops
in the other 75 percent and putting them under one roof, under one marketing
umbrella, with a synergistic plan that once they’re in our system and
we sell out the DMA, that $1,500 goes to a marketing program that nobody can
touch.
“Picture this; what do you think would happen to your business if you could
have advertising to your target market—ages 25 to 54—on Oprah Winfrey
every day of the week twice, on Dr. Phil every day of the week twice, on “Good
Morning America” every day of the week twice, “The Young and the
Restless” every day of the week one to two times, and the five to six o’clock
evening news every day of the week one to two times with a 30- and 60-second
TV spot telling people not only that we do all the measuring and all the installation
and all the service, but we do that at the same price or better than what they
can buy anywhere else? Do you think that would make an impact?”
The TV advertising that this money purchases is generic Budget Blinds spots.
The 800-number shown in the ad will route callers to their nearest franchise. “That
marketplace is there, ready for the taking,” Hallock adds.
TOP-OF-MIND
Once a territory is established, the next question is: What is the best way
to go after those 32,000 households? Budget Blinds’ advertising is aimed at
reaching top-of-mind awareness in each DMA. If a business can get a third of
its target market thinking of it first when it’s time to buy, that’s
all it takes.
Hallock believes no one else can do this except another franchise, but Budget
Blinds has had the advantage of getting out of the gate quicker than the others. “We’re
getting there faster than anyone else,” he says. “When you’re
the market leader, which is what we’re looking to become, nobody wants
to be with a me-too company.”
But getting the calls is only half the job. The next step is making the sale,
and that’s part of Budget Blinds’ vision, too. Franchise owners go
through a two-week training process. What do they get? “The incredible
education, the leadership and most importantly the vision,” say Hallock.
“We’re going to teach them how to be in the business, we’re
going to teach them how to do well, and while they’re in there working
in the trenches every day—and I know it’s hard work because I’ve
been there and done it—they are working for a bigger goal, a bigger purpose
so ultimately they don’t have to do that anymore. Ultimately, their business,
by way of a marketing program that’s synergistic with franchisees connecting
to them, they’ve got something they can never have on their own.”
The training is as detailed as learning the first five words they should say
to a customer. They also learn which customers to go after and to sell at profitable
margins. “We have taught our franchisees how to do this business, I believe,
better than anyone else. They average a 50 percent gross profit margin, they
average a $1,000 per ticket sale, they average a 75 percent closing ratio,” Hallock
says.
Another part of the vision is keeping overhead expenses as low as possible.
Budget Blinds franchisees work out of their homes, they sell in the customer’s
home out of a van and there is no inventory. “We’ve got everything
as streamlined as you can make it. So there are very minimal expenses associated
with running this business when you do it correctly.”
Doing it correctly includes knowing who to go to for business. Too many small
independent retailers go after what Hallock calls “the low-hanging fruit,” such
as new housing being built. “Everybody thinks that is where the market
is. That is where all the competition goes. Do you realize that six out of
seven window coverings that are sold in America today are sold into an established
home?
“That’s why we built this whole master plan—our vision—to
go into the market and, yes, we’ll get the low-hanging fruit, but really
it’s designed to get into the mind of the consumer who’s in the
established home. Why? Because of a higher ticket per window and higher gross
profit margins.
“This industry is so concentrated—over concentrated—on price
and under concentrated on value and selling. Price is always going to be more
in the mind of the seller than it is in the mind of the buyer. Perception is
reality. If I made a sale with 70 percent gross profit, but the customer thought
they got the best deal of their lifetime, did they get a great deal? Absolutely.”
THE PIPELINE
There are advantages to being under the umbrella of a larger organization.
Budget Blinds corporate office, for example, negotiates contracts with window
treatment
suppliers and each franchise can buy directly from the supplier using the corporation’s
discounts.
There’s an advantage in working with a company with the knowledge and experience
to know when to make changes. Mid-month Budget Blinds rolled out a new marketing
campaign with a new image, new graphics and a new product line. Although the
company began by selling blinds and has had great success with it, it has added
shutters and draperies. All of them, like their blinds, custom ordered, nothing
ready-made. The tag line on the company’s new TV commercials is, “A
style for every point of view.”
There’s an advantage in working with a company that has a big picture in
focus. “Part of our vision is to have a diversified organization of direct
sales in what we call the gray areas and franchisees who sell in their contracted
territories,” Hallock says.
There’s also an advantage in working with an organization whose vision
extends beyond the immediate horizon. Budget Blinds’ is looking to form
a direct pipeline with suppliers, which Hallock describes as a win-win situation
for everybody.
“What we’re looking to do is take away all the expense for manufactures
in working with us,” he explains. “Every manufacturer has a sales
force whether they want one or not that has to be covered. Every manufacturer
has a customer service department. We’re looking to build a pipeline where
we are the sales force for each of the manufacturers that are on our primary
vendor list; we are the customer service force for all of the manufacturers on
our primary vendor list. We do it all and the manufacturers never have to talk
to a single franchisee because we’re doing all that for them. By taking
that approach we can offer pricing to franchisees far better than anyone else.
“For the manufacturers, we’re going to take all the billing problems
off their plates. If our franchisees want to order from a particular manufacturer
they go right through our pipeline and we go to the manufacturer with one account
and they bill us.
“That’s what we’re striving for this year.” |
