Following are highlights from Rainbow Rentals just released 10K.

Wayland J. Russell
Chairman of the Board, Chief Executive Officer
"We plan to open 75 new stores by mid-2006, and augment that growth through acquisitions during this time frame. That represents 70 to 80 percent growth in store fronts over the next 4 years"

Management’s philosophy “customers will pay you because they want to, not because they have to”

During 2002, Rainbow opened 12 new stores (five in existing markets and seven in new markets), consolidated two stores into existing locations and sold one store. so far in 2003, Rainbow consolidated two additional stores into existing locations.

The Company’s operating strategy is to operate high volume store locations with core stores (stores opened three or more years) averaging a minimum of $1.0 million in annual revenue in conjunction with generating store level operating income ranging from 20% to 22%. Annual revenues per store, including core and non-core stores, were approximately $814,000 during 2002

By not imposing many of the fees that are standard in the industry, such as club, waiver, processing and delivery fees, Rainbow enables its customers to afford higher quality merchandise with additional features and benefits.

Rainbow generally maintains a uniform store size (4,600 square feet, on average), color scheme, store layout and display signs. Stores are intended to provide an appealing retail environment and are modeled to resemble a quality furniture and electronics showroom

Rainbow’s regional managers and store managers have extensive experience in the industry and have worked with the Company for an average of approximately ten and six years, respectively (excluding managers from newly opened and acquired stores).

Currently, Rainbow employs eleven regional managers and one regional vice president. Management intends on maintaining an average region size of approximately 10 stores.

Rainbow believes its model for opening new stores results in more predictable growth and greater operational control than is typically achieved through acquisitions.

Rainbow’s primary method of growth is through the opening of new store locations. New stores have a maturation period of approximately three years. Rainbow plans to open approximately 10 additional stores during 2003

Rainbow’s merchandising strategy is to carry same quality of merchandise that is available from more traditional retailers, and that customers are willing to pay for value and quality. By focusing on higher quality, the Company avoids frequent service problems associated with inferior products.

Rainbow has developed a formal training program that each associate must successfully complete before becoming eligible for promotion to store manager. This training program for potential managers consists of a three to six month curriculum involving formal classroom training as well as on-site store training.

In order to facilitate open lines of communication, Rainbow has a committee comprised of top performing managers to serve as a sounding board for new concepts and innovative operational and sales techniques.

Rainbow advertises in both English and Spanish to reach the diverse segments of its customer base.

Since merchandise is rented rather than purchased, Rainbow focuses on a customer’s credibility, not the customer’s credit history. The approval process is designed to take less than one hour.

Management’s philosophy is “customers will pay you because they want to, not because they have to” and every renewal date offers the opportunity to sell the customer on the benefits of maintaining a good account with Rainbow

In 2002, management decided to upgrade Rainbow’s current computer applications in addition to rewriting its point of sale system. Management anticipates these applications to be completed and released during the fourth quarter of 2003 and the cost, including required hardware purchases, will be approximately $500,000.

In response to new store openings by competitors in Rainbow’s existing markets, management has implemented a competitor response store action plan. The existing Rainbow store is given additional advertising, special pricing and promotional allowances, as well as an influx of new merchandise to compete with many of its competitors’ grand opening programs.

As of March 19, 2003, Rainbow had approximately 895 associates of which 661 were full-time. Approximately 40 associates are located at the Company’s corporate headquarters in Canfield, Ohio.

Rainbow depreciates inventory on rent using the units of activity method. Under the units of activity method, merchandise on rent is depreciated in the proportion of rents earned to total expected rents to be provided over the rental contract term.

The entire 10K is available here