IN THE BUSINESS - TOM RAYNOR, CHAIRMAN & CEO, FLEET FEET INC.
By David Monti.
(c) 2011 Race Results Weekly, all rights reserved
March 22, 2011
Race Results Weekly: I see in your bio that you were one of the early employees at Nike.
Tom Raynor: That is correct. Actually, I started working for an independent rep group for Nike, first, when they had independent reps, before they took them in-house. I worked for them for about a year and a half. Then I was doing technical clinics, and account visits, and training programs, and things like that. I was doing monthly reports that I was sending up to Nike, and I guess that they were getting read by people up there. They decided to start a program to have field reps themselves and work for Nike. I was port of that program.
RRW: And then you spent a good stretch at Brooks.
TR: I did. I spent five years at Brooks. I started in 1984 going through 1989 when they were based in Rockford. I was eventually director of marketing, development and design for Brooks.
RRW: It was there where you probably learned a lot about the relationship between shoe companies and their retailers.
TR: Actually, I started in retail. Before I started working for Nike I worked for a store called the Athlete's House which was in Nashville, Tenn. And after that, I worked for the Athlete's Foot, which had five stores in Tennessee. So I started learning about manufacturer's reps then. Even at Nike, I did a lot of account calls. We would have account calls in conjunction with sales reps. At Brooks, I was working even more directly with accounts, but more with the manufacturing side of the business.
RRW: I'm fascinated by a comment on your company's website which says in 1993 you came to Fleet Feet to "resurrect" it. Why does it say that?
TR: I think at that point in time Fleet Feet in general was struggling with the change that was going on in the running specialty trade channel. Like a lot of other retailers, the channel had come under attack from a couple of standpoints. Number 1, there were a lot of people getting into the business. Big boxes were starting to spring up all over. They were going to have every product all the time in every color in every size, so they were going to put the specialty guys out of business. Of course, that didn't happen. There were a number of stores which were products of the 1970's and 80's that had just been transcended by the new way of doing things. They started, really, as stores which serviced the serious running community who couldn't find product in other places. They continued that focus, even as the number of serious runners was declining, and the number of casual runners was growing. And, the ratio of men to women was declining, and so there were a lot of new women customers out there, but they didn't have any athletic background.
So I think they (the retailers) were caught a little bit in a time warp. I think that people had been doing it for ten or 15 years, they had gotten tired of doing it. I think the economic model wasn't sound for that point in time, with escalating costs, escalating inventories, and an escalating necessity to hire, train and retain better people. I think it was just the end of a cycle for a whole trade channel, including Fleet Feet. We were really no different. If you talk to the vendors about those days they'll tell you the same thing. There were a lot of stores who were credit risks for manufacturers. There were a lot of stores who weren't paying their bills at all, and there were a lot of stores which went out of business. There were 37 stores at that point in time, but there were only about 15 viable operations going, and I would say they were viable in spite of having Fleet Feet on the door. They had been run well, managed well financially and had good strong community ties. Those stores had really done a really good job. We had two stores in the Greater Sacramento area that had done well. That was the foundation for rebuilding the company.
In addition, I inherited two stores that were in bankruptcy --the original Sacramento store and the Davis, Calif., store-- and we got good management in there. Eventually, those people ended up buying the stores from me. That was really the rebuilding year. We also had a franchisee arbitration suit which drugg on for eight months that was extremely time consuming to deal with. And, we had tax issues. All in all, it was not much of a different rebuilding effort than other people had done. I think it's gotten a lot of attention as if I did a lot of it myself. The reality is that the franchisees themselves did a lot of rebuilding. We defranchised, sold or closed 21 locations, so we got down to 16 or 17 locations at that time. Then slowly, in the mid-90's, we started to add locations back, and that's really been the platform for us going forward.
It's funny. I think in 1993 when I bought the company we had 37 stores, and in 2000 we had 37 stores as well. So, our net gain was zero stores. But, of course our business has gotten much better, and our quality of franchisees has gotten much better, and it was just an interesting time in the business.
RRW: And I see now that you have 88 stores?
TR: Actually, I think the number is 89, and we have two more which are in the final stage of the opening process.
RRW: That's an incredible amount of growth, especially when you consider that people thought the running specialty store would be squeezed out of business by internet sales and catalog retailers on one side, and big box stores on the other.
TR: Eight out of the last nine years we've had double-digit same-store comps (same-store sales rose by at least 10% per year). So, obviously, one of the keys to success is the franchisee's commitment to implement great programs that acquire new customers, create new runners, create new walkers, deal with a broader range of customers. The medical referrals have become a big part of our business. Our couch-to-walk programs we do with New Balance called "No Boundaries" has generated new customers. And, I think really that that's the message. That we really have a very strong support team here at Fleet Feet. We have 20 employees for 90 franchises, which is really a high ratio in the franchise business. But the other thing which is really critical to it is that we don't have a franchise sales department. So, none of the 20 people are focused on trying to sell franchises. Our focus is on business development for existing franchises. And, I think that's why you see double-digit comps. It's not from adding stores.
You know, your comment was interesting because the reality is the first guys who were going to put us out of business were mail order, and those guys came on board in the late '70's. And, it was really mail order. It was those ads in the back of the magazines. They came along, then the big box came along, and then the internet came along, and all of those things were going to put us out of business. I really believe that the mass of information that's out there is just this huge fire hose that the consumer is drinking out of. They want somebody to filter that information. Absent a good filter that they trust, they're going to do the research themselves. But, with good filters they're going to default to the best sources of information and the highest levels of trust with the retailer. The reality is (that many retailers are) not really a very service-oriented business. It's denigrated to the point where it's really become more of a vending machine as opposed to a real service aspect of business.
So, all of our stores are locally owned and operated. I think that's key when we have people who want to invest in the company or buy the company. They always have the idea that they are going to have 150 corporate stores, which I think doesn't work because it really takes the local ownership of somebody who has a vested interest and sweat equity in the business. I think that's our key: you find great people, you give them as much support as you can, and you help them through the good times and bad.
RRW: In the franchise model, the owner of the store has to make a serious commitment of capital and time, whereas in a corporate-owned store it's not the same. What kind of person becomes a Fleet Feet franchisee?
TR: It's really changed a lot. It used to be that it was all serious runners. Everybody who was a franchisee was a serious runner, and a lot of them were running ultras, and a lot of them were doing Ironman races, because that's what Sally Edwards, who founded the company, did. So, these people met Sally, and she was wonderful and charismatic. She really had this brilliant idea to franchise this chain of stores. And out of that, we got people who loved athletics, who may or may not have had the business acumen to grow and thrive in a small business environment. Now we get much more diverse in the kind of people. I think most of our franchisees wouldn't tell you that they are serious runners. They're runners, but don't consider themselves competitive, serious runners. We have a lot of people who are four and one-half hour marathoners, which really kind of reflects our customer base.
The basic franchisee is willing to take a risk. They are very disciplined, like athletics requires. They're really grounded in reality. They don't have lofty, unrealistic dreams for their business. And they're willing to put in the time to make it happen. We don't get many people who have a retail background, surprisingly. Most of our people come from other walks of life. They're attorneys, they're heads of sales at a company, they're stockbrokers, they're accountants, they're rocket scientists, they're general contractors. We really don't get a narrow range of franchisees anymore. It creates a very diverse culture for us. About 50% of the people who own and operate their stores are women, which I think really gives us a huge competitive advantage to have that balance. We have the same balance on our staff, not intentionally going out and saying we need to recruit woman, we need to go hire a woman, we need a woman to own and operate the store. I think a lot of them started with Sally. Having a welcoming environment, having a mutual respect for each other has really built a strong culture for us. That's important in building a brand. That's what we're about. Our brand is Fleet Feet. Our brand is not Nike or New Balance or Asics. Our brand is Fleet Feet, the brand that we want the customer to trust to buy. If we do that, we'll be in pretty good shape.
RRW: What is the customer looking for now at a running specialty store? What's really selling well these days?
TR: Well, there's a couple of trends that I think are really going to be important for us. I think the first trend, I think the customer is looking to us for other avenues to round out the complete customer experience. What I mean by that is I think they're looking to us for training programs, travel opportunities, camps and retreat opportunities. I think that's going to be a much bigger part of our business going forward. We had 80,000 people last year go through our training programs in our stores. Can you imagine? That's 80,000 people signing up and paying for training programs. Maybe most of those people used to go to personal trainers and gyms. I think one of the trends now is inclusiveness, and the stores having a broader range of opportunities for people to be included in something on some level and be comfortable.
On the product side, there's a lot of talk about minimalism now as you probably know. Minimalism, all the way from barefoot running, up to the Five Fingers product, up through minimalism shoes we're doing with New Balance, with Nike and with Saucony now, all of which have done well in our stores. We've moved over, I guess, from 12 or 15 years ago, there was a big push to put everybody in motion control shoes, and to try to over-control the foot. We had always had a philosophy that the foot was very adaptive, and you couldn't overcorrect the problem with a shoe and expect to have a long-term solution. We always try to work with a combination of a shoe that worked for a customer, provided enough flexibility and enough cushioning, without over correcting their foot; let the foot go through its natural motions.
I think the other thing that has really been a trend --I think we're a little behind on it on the store level-- is the social media side of things. We have some stores which are doing a tremendous job with Twitter and Facebook and Four Square, and those internet applications and communications with customers. But, from a product standpoint, people talk a lot about minimalism, it's still only about eight or nine percent of our business. The rest is conventional training shoes. I think more people are more open to trying new things, both on the retailer side and on the consumer side. So, that's really exciting for us. We feel like we have a chance to be ahead of the curve.
The other area that we're doing a tremendous amount of business now is (the) sports medicine category. That started with simple things, like The Stick (a massage roller), and now we're doing Trigger Point, which is an extremely good system for maintaining physical health. Obviously, we've always done a good job with nutrition, we've done a great job with the Strasbourg Sock, which is great for Achilles or plantar fascia problems. Superfeet, and over-the-counter orthodics, and Balega socks, a really technical product which really helps you perform better. You know, having an eye open for new product and not commoditizing your offering to the customer is really important. They're going to trust you. They're going to trust that you looked at all of the products.
RRW: It's been our observation that successful running specialty stores tend to be the focus of running activity within their communities. It's the place where people go for advice, meet up for training runs, and perhaps even the management of a local race. Do you think that's more or less true for your franchisees?
TR: Well, I think it's true for all the great (running) specialty stores. I know almost all the guys in the country that have great stores. You know, the guys that are really doing a great job, they understand the asset they have. They have three things that everybody who's in business wants, no matter what you're offering, whether you're a race director or a manufacturer. They have customers, a customer base they already understand, and they know, and they have customer data on. They have communication, because the customer gives them the right to communicate with them, through e-mail or Facebook, or some other aspect of that. And, they have a physical location, which is one of the things that running clubs, in general, (don't have). There is always somebody there for them to talk to. There's always somebody there for them to run with, to find out about a group.
I think last year, I think we did something like 2500 events out of our stores. Whether they were something big, like the Soldier Field 10-Miler, or something small, like the women's fun run, that's a lot of activity in stores. The store here in Carrboro has an event almost every single night. I think you're right. They not only become the hub, but they become the consistency in the running community. The store owners see the manufacturers go through peaks and valleys. They see good product and bad product coming through the manufacturers. That kind of washes out. The owners of the stores stay in the same place. The employees of the store stay in place. They stay longer so they have more consistency, more of a presence with the store. I think that's fundamental to the success of any retailer, not just our stores.