Progressive Rentals March-April 2004

RTO Miscellany by Ed Winn III

Constitutional Clamor in Arkansas by Ed Winn III

Performance Reviews: Retooling the Employee Appraisal by Phillip M. Perry

APROfile: Larry Sutton by Kristen Card

RTO Miscellany

by Ed Winn III

It is probably true that Wendy’s and McDonald’s executives do not sit around and talk about how to cook hamburgers. That is too bad in a way. If they did, the world might have better hamburgers. Rental dealers, on the other hand, do sit around and talk about how to rent TVs better. As a result, fast-food conventions are probably not much fun and not all that edifying. Rental dealers meetings, by contrast, are usually lots of fun and invariably instructional because of rental dealers’ willingness to share ideas and business practices. Lessons are best learned from direct dealer-to-dealer contact so that the nuances of the practice may be gleaned. Here, nonetheless, is a summary of some rental dealer innovations, thoughts, issues and practices that have surfaced at recent rental dealer gatherings. MISCELLANY 1: IT’S 10 A.M.,

DO YOU KNOW WHERE YOUR TRUCKS ARE?

One dealer who didn’t know the answer to this question decided to do something about it. He installed global positioning devices in his trucks. These are not the kinds of GPDs that sit on the dash with electronic street maps to help drivers find obscure addresses. These GPDs were installed out of sight with a wireless hookup to the owner’s computer in the home office. At the touch of a button, the dealer can see on a map on his computer in real time exactly where each of his trucks is. He already knows more or less where they are supposed to be. For the first 90 days on the job, probationary employees are not told about the GPD. It ends up being a useful tool for measuring an employee’s truthfulness, honesty and industry. The dealer has also programmed the system to send him e-mail whenever a truck goes within a half mile of the driver’s house. The cost of installing the GPD ran the dealer $600 per truck (on the West Coast) and the real time tracking service runs $30 per month. The dealer is persuaded that the installation of these devices in his trucks has doubled the productivity in his company. The GPD market is growing rapidly. Rental dealers should be able to locate local companies selling these devices and offering whatever kind of tracking service a dealer might desire.

MISCELLANY 2: REPAIRMAN SCAM

A multi-store chain was happily using an out-of-house service technician to repair electronics for a number of years. The tech came and picked up the broken merchandise from the store, repaired it in a more or less timely fashion, billed the manufacturer for work covered by a warranty and returned the repaired items to the stores. Everyone was happy and life was good—the repair headache was seemingly solved. Until one day, entirely by accident, a store manager happened to notice the service tech in the front of the store copying information from the back of units for rent on the floor. He attributed no nefarious motives to the tech and didn’t think much about it, but happened to mention it to the regional manager one day who, in turn, mentioned it to the home office. The behavior was just quirky enough to get someone in the home office to call a supplier or two and ask for records of the warranty work billed by the tech on company-owned units.

It turns out that the tech was billing and collecting on lots of TVs that the company had never marked for repair. He was sending in the serial numbers of the units on the showroom floor that he copied down on invoices to the manufacturer for repair work that he was not doing. The higher than normal repair rate ascribed to the company was costing the company money when it came time to negotiate pricing with the manufacturer, but the specifics of the high repairs were never directly on the table for the rental company to see and analyze. This little scam had gone on for a long time and the tech collected thousands of dollars for bogus repairs. There was an easy fix. Fire the tech and report him for theft, which happened. Now, the company gets a warranty repair work report from its manufacturers and matches those reports with store repair reports. The service tech is probably looking at some jail time. Rental dealers know that most people are honest or they would not be able to stay in business. Most people, however, does not mean everybody and there is always somebody looking for a way to scam the system.

MISCELLANY 3: COMPUTERS IN BULK

Everyone knows that Sam’s and Costco and the other warehouse retailers sell in bulk. One enterprising rental dealer has made a virtue out of their practice by going around to his local warehouses and making a deal with each one to purchase their computer close-out inventories at their cost plus 10 percent. With computer technology continuing its intermittently feverish pace, there is a lot of inventory change in computers. These deals help the warehouses get rid of older inventory and give the dealer a great price on brand new, still rentable machines. The dealer’s deal making ability did not resolve all of the issues that arise when getting more heavily into computer rental, but it did open up a reliable, economic source of supply of new machines. The dealer reports that Sam’s and Costco are both buying computers at very good prices.

MISCELLANY 4: RENTING TO INSURANCE COMPANIES

Another enterprising rental dealer went around to the major insurance companies in his markets and offered them a rental package for insured consumers whose houses burn down. The rental company will quickly provide an apartment full of furniture to the fire victims and the insurance companies have agreed to pay six months’ rent on the furniture in advance. This merchandise is not going to stick and the dealer has to provide stellar service during a traumatic time. Not all of the insurance companies were interested, but the advance payments from those who were have done wonders for cash flow and the program has proven to be a helpful addition to the stores.

MISCELLANY 5: THE IRS AND OWNER COMPENSATION

In the old days of C corporations, the Internal Revenue Service would occasionally challenge a rental dealer for claiming what the IRS considered to be excessive owner compensation. The IRS argument was that the owner took too much from the company in salary to avoid having the corporation’s profits taxed twice, first at the corporate level as corporate income and then again at the personal level when the owner took the money as a dividend. Lately the worm has turned completely and the IRS has challenged a rental store owner who operates as an S corporation for not taking enough salary out of the company. The store threw off about $200,000 in profits during the year in question.

The owner took about $50,000 in salary and took the rest as pass-through income on his K-1. The advantage to the dealer is that he only had to pay Social Security, Medicaid and Medicare taxes on the salary and not on the pass-through income. So the IRS challenged the salary amount, maintaining that it was not high enough and the debate will be over what is fair compensation for the owner of a rental enterprise that throws off $200,000 a year in profit. This miscellany offers no answer to that question and is intended merely to alert rental dealers that this is an issue into which the IRS may inquire.

MISCELLANY 6: CAMERAS AND PRINTERS AND MEMORY, OH MY!

A dealer reports that he is having good success lately renting a digital camera/printer package. The printer is one of the many available that accepts memory cards directly from the camera with no need for a computer hook-up. The prices of high-quality digital cameras have come down dramatically lately, making the package attractive to rental customers. The package does not come without issues, however. Few packages do. Another dealer reports that he has had to discontinue renting printers altogether (he used to rent them with computers) because so many customers were coming in to demand that the store replace the ink cartridges in the printers.

At roughly $50 per cartridge, replacements were not in the dealer’s pricing formula and when printing pictures, printers run through cartridges rapidly. Then there are questions of whether to stock and sell photo quality printer paper (the dealer with the package does not) and whether to stock and sell upgraded memory cards to replace the modest memory that typically comes with the camera (again, the dealer does not). So here is a product package that is working for some, but not for all. It may be worth investigating in your markets. Once again, good luck.

MISCELLANY 7: CAN YOU SPELL OSHA?

One rental dealer who was feeling dunned and finally insecure by a recent barrage of offers to buy posters and notices for employees under penalty of near death wondered aloud whether he had to comply with the new OSHA recordkeeping procedures, with its own set of posters and notices. The OSHA rules require ornate and arguably cumbersome record keeping for all on-the-job illnesses and injuries. There are exceptions as to which employers have to keep the records. Small businesses with fewer than 10 employees are exempt—that is 10 employees per company, not per location, according to OSHA.

Then, certain “low hazard” industries are exempt. The problem is that the list of exempt industries is made by SIC code, the federal government’s Standard Industrial Classification. The list is, by OSHA’s own admission in the regulations, incomplete. Moreover, the four digit SIC codes are not being used anymore and are being replaced by the six-digit North American Industry Classification System code. There are no exemptions listed in the regulations by NAICS number. Confused yet? There’s more.

Low-hazard industries are defined as those with an average DART (Days Away, Restricted or Transferred) rate at or below 75 percent of the national average DART rate. The DART rate has lately replaced the LWDII (Lost Workday Injury and Illness) rate. Please do not snicker. This is your government at work devising these acronyms and your tax dollars are paying for it. So are rental stores exempt? Radio, television and computer stores are exempted.

So are “retail stores, not elsewhere.” The specific SIC code that some rental dealers were using when SIC codes mattered includes furniture rental, television rental, airplane rental, industrial truck rental, oil field equipment rental, live plant rental and assorted other categories of things that people rent. It is not listed as an exemption. Remember that SIC code—and now NAICS code classifications—are determined by the merchant. These numbers are not ordinarily assigned. Prudence would suggest that dealers post the notice and keep the records. It is difficult to say with any certainty exactly what the law requires of rental dealers. If any rental dealer has had occasion to ask this question of OSHA officially, APRO would like to know the answer.

No matter what, all employers must report to OSHA any workplace incident that results in a fatality or the hospitalization of three or more employees. For more information, go to www.osha.gov. Once there, search for the document, “Record Keeping Policies and Procedures” (RKP). And good luck.

Ed Winn III is APRO’s legal counsel. His e-mail address is edwinn@e-bylaw.com.

Constitutional Clamor in Arkansas

by Ed Winn III

Given its location deep in the Bible Belt, it should perhaps be no great surprise that Arkansas treats the notions of money lending, interest and usury differently from most other states. In Arkansas, the regulation of the loaning of money is contained in the state’s constitution, whereas almost everywhere else, it is entirely a legislative matter. California, Oklahoma, Tennessee and Texas all have constitutional provisions relating to usury, but have left regulation of interest to their respective legislatures. In these other states, there is a sort of default provision in the state constitutions that regulates usury if the legislature fails to do so. In Arkansas, the constitution sets the rate and the legislature has no say in the matter short of amending the constitution.

Therefore, the situation in Arkansas via-a-vis usury limits is unique in the country. Until 1982, the Arkansas Constitution limited interest rates in the state to a flat 10 percent per year. In 1982 when the prime lending rate approached 20 percent in the United States, the state amended its constitution to provide some flexibility to interest rates. The amendment pegged the maximum interest rate to no more than 5 percent per year above the Federal Reserve discount rate or in the case of consumer transactions, 17 percent per year. However, a year later, the Arkansas Supreme Court read the amendments language in peculiar fashion and concluded that interest rates on consumer transactions in the state are also limited to the lesser of the floating rate or 17 percent.

Today the floating rate is 10 percent. Over the years, various legislative enactments have been challenged as violating the constitutional limit on interest rates. The courts have jealously guarded their right to decide what is and what is not usury in the state. From time to time, the Arkansas Supreme Court has knocked down some legislative pronouncement that the court deemed as infringing on the constitutional limit on interest rates. It did so most recently in 2001 in a case which held that the state’s Check- Casher’s Act was unconstitutional. It is likely that the result in this case has emboldened plaintiffs’ attorneys to take on the rental-purchase industry. Therefore, some understanding of the payday loan case is important to explain why the Arkansas rental-purchase industry has suddenly come under legal attack. In the 1990s, the payday loan industry was successful in getting the Check-Casher’s Act enacted.

The statute specifically authorized merchants to charge a fee of up to 10 percent of the face amount of a personal check for providing the service of cashing it. The statute further authorized merchants to charge a fee of $10 per check for offering a deferred presentment option, requiring the merchant to hold the check for a agreed period of time before cashing it in exchange for this fee. The statute had the following language: The fee, when made and collected, shall not be deemed interest for any purpose of law, and a check-cashing transaction, including one (1) with a deferred presentment option, shall not be deemed to be a loan, loan contract, or a contract for the payment of interest notwithstanding any disclosures required by this chapter. Payday lenders used this statute as protection from the constitutional limit on interest charges, as payday loans often carry triple-digit interest rates.

Even so, payday lending paperwork disclosed annual percentage rates for the transactions, primarily not to run afoul of the federal Truth-In-Lending Act, which views payday loans as loans without attempting to regulate their interest rates. In the lawsuit, Luebbers v. Money Store Inc., it was undisputed that the defendant payday lender was in full compliance with the Check-Casher’s Act. Plaintiff Luebbers had written a check for $400 to the Money Store on September 3, 1999 and received $350 in cash. The Money Store charged a $40 check-cashing fee and a $10 deferred presentment fee, promising to hold the check until September 17. The question raised in the lawsuit was whether the Check-Casher’s Act was constitutional and the state Supreme Court ruled that it was not. The defendant argued that the legislature intended to exempt the payday loan business from the usury strictures in the state.

The court ruled that the legislature does not have the power to determine that a certain kind of transaction is not a loan or that a certain fee is not interest. The court viewed the Check-Casher’s Act as “a patent attempt by the legislature to usurp a judicial function.” The court went on to offer fairly standard judicial dross to the effect that courts must look to the substance, not merely the form, of a transaction to determine if it is usurious. This decision in Luebbers was immediately followed by a spate of lawsuits against other payday lenders in the state. The argument in the three new rental-purchase lawsuits is whether rental-purchase transactions are really disguised conditional sales bearing interest at a rate in excess of the constitutional limit.

Without more, the Arkansas rental-purchase industry might have cause for real concern. However, the good news for the industry is that the Arkansas Supreme Court has already ruled on the true nature of rental-purchase transactions. It did so in 1989 in a case called Crumley v. Berry, which held that traditional rental-purchase transactions with consumers for electronics and furniture of the type in use then and still in use today are true leases and not sales. The court made this ruling without resorting to the then-newly-enacted Arkansas rental-purchase statute. The court based its ruling on the established case law, not only in Arkansas, but also around the country and on the sound reasoning of the best legal scholars.

The court’s holding in Crumley was that when the lessee has an option to terminate the lease at any time, the transaction is a true lease and cannot be a conditional credit sale. The court agreed to follow what it acknowledged in the opinion as the majority legal view in the country. The court acknowledged that there was a minority view that did not consider a terminability option as dispositive of the characterization of the transaction, but rather as merely one factor among anywhere from five to 14 factors to be considered when making the lease/sale distinction. Of course, the rationale for the majority rule is that without an obligation to pay, there can be no debt as a logical matter and without a debt, there can be no interest.

The logic of the majority rule also has the practical marketplace effect of providing legal certainty to lease transactions that will in turn foster commerce. This is one of the oft-stated goals of the all-mercantile law—to provide legal certainty. If merchants knew that every time they entered into a lease that the transaction might be scrutinized by a court and recharacterized for any one of as many as 14 reasons, there would be fewer leases written because of the risks involved. There was a dissenting judge in the Crumley case. The dissenter thought that the rental-purchase transaction was a sale and clearly usurious and declared, with no analysis, that the lessee had in fact agreed to pay a set amount.

The judge simply ignored the fact that the consumer had the unqualified right to return the property and terminate the agreement at any time with no further obligation. Plaintiffs in the three new rental-purchase lawsuits have an uphill battle. They will have to persuade the Arkansas Supreme Court to overrule itself, as the facts in the Crumley case are substantially the same as current industry practices in the state today. In the intervening 14 years, the majority rule—no obligation is dispositive of the lease/sale issue—has continued to be followed in bankruptcy courts around the country and most state courts when the issue occasionally arises. There is no reason to suppose that the Arkansas Supreme Court will be persuaded to reverse itself and adopt this minority, cumbersome- to-apply, anti-business view. Copies of the cases cited in this article are available to APRO members upon request to the APRO home office.

Ed Winn III is APRO’s general counsel. His e-mail address is edwinn@e-bylaw.com.

Performance Reviews: Retooling the Employee Appraisal

by Phillip M. Perry

The performance review: Too often it’s an ordeal that’s loathed, feared and rescheduled until it can’t be put off any longer. So common is the tendency to disparage the traditional employee evaluation that we have to wonder if the annual ritual is worth the effort. Why not drop the whole thing and get to work? Successful employers, of course, have come to grips with such emotional reactions and recognize the performance review for what it is: The best tool for creating a motivated workforce that boosts the bottom line. Having a performance appraisal system is the most important step any organization can take, regardless of its size,” says Dick Grote, a Dallas-based performance management consultant (www.groteapproach.com).

“Every single person in every single company wants to know the answers to two questions: First, What is it you expect of me? Second, How am I doing at meeting your expectations? Performance appraisals are the one system we have that gives people the answers to both questions.” And what if you don’t have a good system in place? You end up with employees who work in the dark and who think they are doing the right thing because no one tells them different, says Grote. The fact is that people need continuing guidance in order to improve. “Too often managers don’t say anything unless they catch someone doing something wrong,” he says. So how can you perform a really great performance review? Here are some tips.

REVIEW THROUGHOUT THE YEAR

Too often performance evaluations are lumped together into a single high-stress meeting at the end of the year. Not good. Effective evaluation, say workplace consultants, is a continuing process. Successful leaders work closely with employees throughout the year to set expectations, evaluate progress and re-adjust performance. Regular reviews obviate an otherwise all too common disaster— unpleasant surprises at evaluation time. Suppose you make a grand announcement about an employee’s poor performance in an annual appraisal meeting. The target of your criticism is likely to come back with this retort: “Why didn’t you tell me this earlier in the year?”

That’s a good question, Grote says: “People want to do a good job,” he says. “It’s the responsibility of the managers to let them know how to do it.” That means communicating expectations at the beginning of the year and giving feedback regularly as the months pass. So just how often should you interact with employees? It depends on the individual and the role he or she is in, says Grote. Maybe with senior executives annual reviews are adequate. Moving down the ranks, however, means more frequent reviews. Much also depends on how long the person has been in his or her current position. For a seasoned employee, you may review performance a couple of times a year. A new employee may benefit from a chat each week.

The best system has no predictable dates for reviews, according to Don Schackne, president of Personnel Management and Administration Associates in Delaware, OH. “Employees maintain a high level of productivity if they don’t know when their supervisors will say ‘we are going to sit down this afternoon for a performance review.’” Conversely, a formal schedule for annual or semiannual reviews can create what Schackne calls a performance halo effect. “As you approach the review date, the employee begins to perform better,” he says. “Then the review takes place and now the employee sits back and performance slides again.” That’s bad for everyone.

QUANTIFY PERFORMANCE

So John’s work performance has been deteriorating over the past few months. How do you know? And just how can you communicate your observation to John in a convincing way? To find the answers, we spoke with Daniel P. Moynihan, a principle at Compensation Resources, a performance and evaluation training firm based in Upper Saddle River, NJ (www.compensation resources.com). He boils down the secret to this, “Keep records on employee actions and results, then base performance ratings on those records rather than on subjective feelings.”

Here’s the reason: Numbers can make a difference in communicating your concerns to under performers. Suppose you have received lots of complaints from customers about an employee. You’ll only cause the person to balk if you say, “You need to improve your customer relations skills.” Instead, say, “We received six complaints from customers about you during the past year.” Then read the details of each complaint from written records. Use numbers, then, when possible. How many times did the employee arrive late for meetings and by how many minutes? How many arguments erupted in the work place? By what percentage was the employee under a certain required performance level? How many times did the employee take an extra half hour for lunch?

This calls for careful record keeping. Moynihan suggests committing notes to paper rather than trusting your memory. “Keep a spiral notebook in your desk drawer with one page for each employee,” he says. “Then write down the good and bad things that occur throughout the year.” Discuss these events with the employees as they occur. During evaluations, refer to your notebook as evidence to convince employees of your desire to give fair assessments based on recorded performance. Failing to tie evaluations with provable workplace events can result in a damaging condition called “performance creep.” Moynihan explains how it works. “Suppose an evaluation form calls for ratings from 1 to 5 on an escalating scale of performance.

The first year the supervisor says, ‘I think you met my expectations so I will give you a 3.’ The next year the supervisor says, ‘well you did better this year and I don’t want to give you a 3 again so I’ll give you a 4.’Over time everyone’s ratings skew toward the ‘outstanding’ end of the scale.” As collective evaluations rise over time, the reviews become useless from the standpoint of assessing and improving performance. Performance creep can also result from disinclination from confrontation on the part of supervisors who may be uncomfortable with the whole review process.

Sometimes if the supervisor assigns a 3, the employee will claim they deserve a 5 and the supervisor backs down and raises the rating. All this doesn’t mean personal characteristics can’t be assessed. You can rate abstract characteristics such as attitude, leadership, initiative, cooperation, interpersonal skills and maturity. But when you do so, make your point with examples from the employee’s performance record. The work diary is invaluable for recording examples and numbers. How about those individuals whose work cannot be measured quantitatively?

An example would be a telephone operator or a receptionist. “The receptionist’s job is to meet and greet people as they come in the door,” says Moynihan. “How do you evaluate how effectively they do that? Maybe you go after customer feedback. Ask clients and vendors: Has the receptionist greeted you well and treated you kindly and answered the questions you need answering?” If you can’t come up with good measurable objectives, then take the three or four main components of the person’s job description and evaluate them against actual performance. Ask yourself what are the key metrics to get the job done and is the person performing well?

IDENTIFY CAUSES OF POOR PERFORMANCE

So Joe is doing poorly. But why? The causes of poor performance can be difficult to determine. Sometimes people are in the wrong role or outside problems are impinging on their work. Other times there is a manager-employee personality conflict. Try asking the employee, “What would you say is one of the key reasons for your poor performance?” Most people tend to shift blame away from them, so you need to get a discussion going. Try asking, “What can we do to improve the work environment to help you perform?” These conversations can be difficult because they often touch on issues of personality and style. It’s important, therefore, to encourage the employee to open up and contribute.

“Make the review a two-way conversation,” says Schackne. “Maybe you say, ‘Here is how I see your performance,’ and then the employee can come back and say ‘here is what I think.’ Make each of your statements a discussion point rather than a threat.” A good program, says Scahckne, lets the employee leave saying, “my boss didn’t tear me apart or belittle me or make me feel like less than a whole person.”

SET GOALS

It’s not enough to delineate the good and bad points of the past year. Set specific goals for the coming 12 months. List a “vital tasks” agenda in which every measurable high priority task is outlined. (See sidebar, “Get SMART.”) Sometimes your verbal prompts will be sufficient to stimulate the employee toward realizing what needs to be done, but you should also ask the employee for insight. What performance would bring the greatest personal satisfaction one year from now? What talents can be honed? Set timetables for improvement. Timetables are important milestones that help avoid procrastination.

The manager, too, needs to follow a schedule. One of the traditional failings of evaluations is lack of follow through. Mark your own calendar at checkpoints that have been coordinated with the employee. Meet with the employee on these dates to discuss progress. Bottom line: The annual performance review, far from being something to dread, is the No. 1 tool for creating a dynamic workforce. Help your employees set their own goals to assure they are invested in the process. Review performance on a regular basis to avoid surprises at the annual review. And finally, go by the numbers. Quantify performance to make sure that facts, not opinions, are the operating mechanisms that assure fairness for all. The result will be motivated workers and a profitable organization.

Phillip M. Perry is a free-lance business writer based in New York.

APROfile: Larry Sutton

by Kristen Card

Larry Sutton—aka “The Reverend of Rent-To-Own”—is in the proverbial pulpit, preaching the gospel according to his beliefs. c “It’s not that different than the ’60s,” Sutton begins with measured tones. “We said, ‘These people need access to washers and dryers. They need access to televisions.’ And before long, it was furniture and jewelry and all these things.” c Sutton’s voice begins to rise. “There’s a big part of our society that’s just left out. They’re left out of the opportunity to acquire nice things because of the way our society is structured.

There’s one thing about being part of the rent-to-own industry and that’s that we don’t leave anybody out. We give everybody the same opportunity to have something nice.” “And boy, what could be better than having something nice on your vehicle when you’re driving around? That’s people’s sense of pride. They use that automobile to envelop who they are.” He’s getting to the heart of it now; you can practically hear his hand slapping the lectern. “And hey, there’s nothing better than that car with a terrific-looking set of rims on it. It makes people feel that much better about themselves.

And guess what? If they feel that much better about themselves, then they’re going to be more productive human beings. They’re going to achieve more personally, both inside and outside. And that’s [slap] a great deal.” Can he get an amen? Actually, Larry Sutton is getting much more than just verbal confirmation of his beliefs. His affirmations are being delivered via the almighty dollar, as franchises of his company, Rent-n-Roll Custom Wheels and Tires, sprout up around the country. If you haven’t yet heard about the entry of custom wheels into the rental-purchase industry, you will. Sutton intends to make sure of it. With four Rent-n- Roll stores of his own within Florida’s Tampa/St. Petersburg area, 11 other locations in operation from Louisiana to New York, 30 more under contract to open and several more in franchise negotiations, the 53-yearold Sutton—who once left the RTO fold—today has all the fervor and gusto of a man who has been born again. Yes, Sutton’s road to custom wheels has been a long and winding one, complete with family ties, terrific success, mergers and acquisitions, smoothie bars and a deteriorating golf game.

It begins when Sutton moved with his mother and two siblings from Ardmore, OK, to Tampa, FL. His uncle, Norman “Slats” Slatton Sr. (APRO’s 1999 Lifetime Achievement Award recipient), owned a Tampabased TV and appliance retail business at the time and wanted Sutton’s mother, Faye, to help with bookkeeping. Then just 15, Sutton began helping around the store as well, first with deliveries, then with service. By his senior year of high school, Sutton had graduated to the floor, studying sales under his Uncle Slats’ tutelage. “At the time, I didn’t know how wonderful it was to get to sit at my uncle’s feet and learn the things he taught me,” says Sutton. “What an opportunity. “He taught me to be humble. I’m not sure I’ve learned it yet,” says Sutton, “but he used to tell me all the time, ‘Be humble. You can manage people by building up others around you.

Show them how to shine. Let them make mistakes, but give them room to shine and they’ll shine like you won’t believe.’” Sutton began a college career, but found it impossible to resist the appeal of the sale. Working on commission, he skipped classes in order to get more “ups” and eventually left school to work full-time. Sutton and his uncle briefly went into business together and then Sutton spent some time managing a television and appliance store for a major retailer. Eventually, he interviewed with Curtis Mathes and was hired as the company’s western Florida rep, hawking TVs to dealers and helping develop the company’s rental-purchase venture. “Our mission was to get our dealers into the rental business,” says Sutton, “just enough to keep them afloat, making some money, because the retail business was so competitive at that time you had to have something extra to stay in it.”

Sutton had already discovered his talent for persuasion and convincing dealers across the nation of the benefits of rent-to-own became his full-time job. But in 1980, an opportunity Sutton didn’t want to refuse presented itself: he became business partners with a man named Bill Ogle and, together, they launched two Westgate TV stores. Retail business was good, but it was clear to Sutton and Ogle that the rental business was better. They changed their company name to Champion Rent-to-Own and off they went, opening up locations throughout western Florida, up to Georgia and over to Alabama. By 1993, they were running about 28 successful stores. When the great RTO consolidation of the 1990s hit, Champion was handpicked by industry veteran Bill White and the brains behind Blockbuster, George Johnson, to merge with their company, which would eventually become HomeChoice. never thought about selling it,” says Sutton. “But I got excited about merging my company with them and going to work for them.

I went from managing 28 stores to being responsible for more than 200 stores throughout the eastern United States. It was a real learning experience.” But the lesson lasted only about a year and a half, during which time HomeChoice merged with Alrenco, which was subsequently sold to RentWay. And while all that merging and acquiring was happening around him, Sutton experienced an epiphany. “I found myself really not being a good corporate citizen,” says Sutton. “Having been an entrepreneur and my own boss for almost 20 years, I just didn’t take to being one of those corporate guys. I decided to take some time off and reflect about everything. So, by March of 1998, I was retired and did exactly what I said I was going to do— I played golf.”

In fact, in the first year of what turned out to be his first retirement, Sutton played almost 300 days of golf. “My golf game got hideous,” Sutton says, laughing. “The more I played, the worse I got. I realized I didn’t have a passion for playing golf. It began to be something to do because I didn’t have anything else to do. To put it mildly, I became not a real happy guy.” Sutton’s next epiphany was that, “No man should retire at 47 or 48 years old. All of us are driven by our passions and our learning experiences. If you’re not learning, you’re not growing and if you’re not growing, you’re done. When you’re at a job, you’re always learning new stuff. Your brain gets a chance to exercise and you feel good about coming to work and going home every day.

None of that was happening for me. So I started searching for something to do.” Sutton tried smoothie franchises, then the check-cashing business, but they just weren’t a fit for him. Then, during a trip to Atlanta to investigate still another professional opportunity, Sutton was told by a friend about some folks out in Texas renting tires. Renting tires? Sutton was intrigued. So he went to Texas to see what Rent-A-Tire was all about. “What I found was a rent-to-own custom rim business,” says Sutton. “I liked what I saw, but we entrepreneurs always think we can take an idea and do something different and make it better. So I promptly came home to Florida and started up Rent-n-Roll Custom Wheels and Tires.”

The first Rent-n-Roll Custom Wheels and Tires opened in October 2000 in Tampa. Sutton has since opened three other stores within the area; his fourth location opened just last month. He began licensing the concept in 2001 and business is booming. “We think this is going to be a banner year for us, getting folks aboard the Rent-n-Roll freight train,” says Sutton. “And next year is going to be great for store openings. We’re crawling right now, we hope to be walking by the end of the year and next year we hope to run a little.” The RTO custom rim business works almost exactly like the rest of the rental-purchase industry. In fact, just as it is with televisions, the “bigger is better” theory helps drive business. “People want bigger rims,” says Sutton.

“The demographic that wants that has exploded. Everybody’s watching MTV—there are songs about rims—and the first thing the guys on MTV Cribs (a sort of Lifestyles of the Rich and Famous for MTV celebrities) show you is their rims. People wanted a $3,000 set of rims, but they’re not going to accumulate $3,000 in cash. So they were going without. Now, all of a sudden, there’s access to a product everybody wanted, but didn’t have the cash to get. That’s why it’s taking off the way it is. “It’s really a fashion business,” says Sutton. “People want a new look, a new feel or they change cars.

Let’s say you go to a car lot today and want a [Toyota] Corolla. You go there and look across the parking lot and there are 20 Corollas. The only difference between them is one’s blue, one’s red, one’s silver, one’s black. That’s it. They all have the same features. There’s nothing left to personalize that vehicle to really make it personal to you. “What’s happened is people have realized you can take any car at all—doesn’t matter what it is—put a great-looking set of wheels on it and make it, like…wow!” Here comes The Rev. “It’s like the frog and the prince: Bam! You just kissed him and made him a prince. He was a frog, he got wheels, now he’s a prince. It’s that dramatic. It really is.” But, according to Sutton, it’s not just the princes who want to pump up their rides; the princesses want a little “bling” for their coaches, too. “More than 30 percent of our customer base is women,” he says.

“Guys come in, get wheels and dress up their cars and it isn’t long before mama is coming in and saying, ‘Hey, it’s my turn now.’” With his return to the rental purchase fold, Sutton’s ties to the Association of Progressive Rental Organizations have also been reconnected. The first time around, during his Champion heydays, Sutton became extremely involved in the then-fledgling organization. “I began traveling around to the different state organizations and hold a seminar and share some of the ideas we were using at Champion to improve our business,” Sutton says. “Then at the end, I’d ask for all of the dealers to commit $300 per store to something we at the time called Team APRO. “That became my function for the industry—to go and try to raise Team APRO dollars.

Then we took that money into the political arena, hired the people we needed to hire and really got the word out across America: ‘Hey, this is not a bad thing, this is a good thing. We’re not hurting people, we’re helping people. We’re a terrific source of education and entertainment for people who would otherwise not have it.’ The fact is, there’s no one company that can go and change the way America feels about rent-to-own. That’s what APRO has done.” Sutton believes it was at these fundraising seminars where he originally earned the “Reverend of Rent-to- Own” title, though he can’t remember who coined the moniker. While strutting around the podium, he had the ideal occasion to show off his larger-than- life persona, ad-libbing and generally overpowering his audience with charisma and contagious enthusiasm. And the big finish, of course, was the call for a contribution—just like a real parson.

Sutton served as an APRO board member for four years and worked diligently with the Association’s public relations committee. In 1994, Sutton was presented with APRO’s President’s Award of Excellence. “To this day, that’s the proudest moment I’ve had professionally,” he says. “It meant I was contributing something and not just taking.” Today, Sutton serves as a board member with the Florida Rental Dealers Association, but has chosen to accept a more passive position with APRO the second time around. While he still feels strongly about the important role APRO plays for RTO dealers, he now has other commitments to fulfill: when he’s not busy growing a new business, he spends as much time as he can with his wife, Susie, and his six kids, who range in age from 25 to 7. A self-proclaimed “frustrated entertainer,” Sutton also plays guitar and sings Joe Cocker-style karaoke. Still, the draw of the sermon keeps The Rev coming back: Sutton has once again begun conducting seminars for APRO from time to time. And, as you might expect, this once-was-lost-but-now-am-found veteran has plenty of lessons learned to pass along to the next generation of RTO go-getters.

“No. 1 is, provide customer service that is heretofore unheard of,” says Sutton. “Go beyond the call of duty, go beyond whatever book you can read, step up and just make a decision that no matter what happens, you are going to serve your customers way beyond their expectations. I mean, hey, these people have a choice, every single week: ‘I can give it back or I can rent it for another week.’ In that environment, it’s just basic economics. You’ve got to give them over-the-top customer service. “No. 2 is, hire people who believe in what they’re doing,” he says. “Instill in them that what we’re doing is not just building a company and making money. What we’re doing is providing access to a group of folks who haven’t had access before.

If your people buy into what you’re saying—buy into the truth—then they get excited, they get motivated and you get business.” Another key to his success, says Sutton, has been a rare quality he got from his mother, Faye. “She taught me, by her example, to forgive anybody of anything immediately,” Sutton says. “I’ve never been one to sit around saying, ‘If it wasn’t for this, if it wasn’t for that,’ because it’s never been an issue. I’ve never wasted my time or energy there. I can honestly say I’ve never held a grudge against anybody for anything. It’s just, ‘OK, let’s forgive and go on.’ What a great way to live.” And finally, the Sutton Golden Rule, which is so evident in everything about Larry Sutton he might as well have it tattooed on his forehead: “Be passionate about what you’re doing. And if you can’t be passionate about what you’re doing, then for goodness’ sake, do something else.”

Kristen Card is an independent business writer in Austin, TX.