At the start, I wanted to have some merchandise that would allow me to have the lowest price point so I filled about 10% of my inventory with low-end furniture, electronics and appliances. I quickly found out that stocking merchandise of that kind only leads to service issues. I’ve been doing this 20 years but I am still learning.
Rick Vadnais, Owner, Premier RTO, Syracuse, New York

RTO Magazine features an in-depth look at the country's best RTO operators in every issue.

The following RTO Excellence Profile of Rick Vadnais is excerpted from the current issue of RTO Magazine, the trade magazine for rent to own professionals. RTO magazine is the most widely circulated print trade publication in the rent to own sector.

Weather can make an extreme impact on any business, and this winter’s blast that covered Rick Vadnais’ location with seven feet of snow in less than two weeks was no exception.

“Toward the end of the storm on a Wednesday, we had our lowest revenue day in 16 months of business,” said Rick Vadnais, 45, owner of a Premier Rental-Purchase store on the west side of Syracuse, New York. “The snow was five feet high right in front of our store and I had to shovel a path just to get inside the front door. And our store sits back about 200 feet behind a large parking lot!”

Thankfully, that slow, snowy Wednesday appears to be the exception to an otherwise stellar first year of growth for the career RTO professional and his staff of six employees. Ever the optimist, Vadnais feels the extreme weather his hometown is known for can actually provide some benefit.

“Our kind of weather truly helps us. Folks are in their homes much more than in other parts of the country. They use our product more because they’re inside more. They get a lot of use out of that 50” Sony television and it makes our merchandise more of a value to them.”

“When you’re from (Syracuse) you just deal with (the snow). We just push it out of the way and keep going. It can slow us down, but it doesn’t last forever. One thing that really helped us was being able to take debit and credit card payments over the phone. In fact, our debit card business has increased each month we’ve been open. There could be a day 10 years from now when no cash is exchanged.”

Vadnais has worked in the rental business his entire career, beginning with a stint at ColorTyme. In addition to ColorTyme, Vadnais has worked for other major rental companies and he was a store manager for Renter’s Choice when they acquired Rent-A-Center in 1998.

“You don’t see it very often when a little guy buys the big guy. It was so impressive that Ernie Talley pulled that off. Taking an 800-store chain and acquiring a 1400-store chain overnight, growing to 2,200 locations, gave store managers plenty of opportunity for advancement. I thought Talley pulled it off with very few issues. I thought it was just great.”

Despite Vadnais’ experience with large rental company operations, it was his time spent working for a small, independent rental dealer that got Vadnais thinking that he, too, could be a rental store owner one day.

“I first got the idea 10 or 12 years ago when I was working for a friend of mine, Steve Ratliff, at Express Rental. To see how successful he was in a small town got me thinking. I learned a lot about independent operations but it took me some time to really commit to the idea. Let’s face it – when you work for a major company your DVP isn’t going to visit you and say ‘Hey – you’re doing such a great job you should go out and do this on your own!’ That thought process has to come from within you. You have got to believe that you can do this and you have got to be willing to risk everything on yourself. I’ve been married 16 years and we have three kids. My house is on the line for this. Everything I’ve worked for is on the line. Not everyone is willing to take that sort of risk. But it’s what ultimately drives you to succeed – knowing just how much is at stake.”

“On January 1, 2005 I started the process of going on my own. I looked at being an independent and I looked at various franchises. Three of the four banks Vadnais approached approved his loan. Of those, Vadnais selected M & T Bank.

“Every loan can be structured differently, and M & T required a certain percentage be dedicated to operating expenses and a certain percentage to inventory purchases. 80% of the loan was to cover inventory purchases and there was enough for the first four months’ of projected inventory. Since we were a new operation, the bank set it up that I would forward invoices from vendors directly to them and they would take care of paying the vendors.”

Faced with 7,800 square feet of empty showroom floor and a bank account ready to purchase inventory, Vadnais drew upon his 20+ years of experience to determine what mix of merchandise to purchase.

“I knew I wanted 60% to go toward furniture, 20% toward electronics and 20% toward appliances. I had a list of preferred vendors given to me, but I also had the opportunity to purchase from whomever I wanted. One way I took advantage of that flexibility was by using a local mattress company for bedding. That way I get the bedding the same day I need it and I don’t have to warehouse the merchandise.”

Another inventory tactic that has worked well for Vadnais is an unofficial arrangement with a few other small dealers in his market where they agree to sell each other merchandise on an as-needed basis.

“We swap inventory probably a few times a month. I want to have enough product at my disposal to never lose a sale. But I don’t have unlimited resources to tie up in inventory expense. This arrangement works well for us all.”

Vadnais says that close to 70% of his agreements are for furniture, which he feels customers tend to keep and pay off. He also says computers are growing at a fast pace, and plasma and LCD televisions are very popular, with old-fashioned tube sets nearly extinct.

“Less than 20% of the sets on rent or on our showroom floor are the old-style projection or tube sets. 16 months ago when I opened this store that figure was more like 50%, so the decline is happening at a rapid pace in our market.”

But Vadnais indicates that his customers are not so fast to adopt the latest trend in laundry appliances.

“We’re really not big on the front-load washer and dryer sets yet. I’ve got a few on rent, but it’s currently less than 10% of our laundry business. In my particular area most people just want a washer and dryer, plain and simple. They’d rather spend $20 a week for a top load rather than $30 a week for a front load.”

Vadnais’ entry into RTO hasn’t been without hurdles, and the first lesson he learned as an owner came from a merchandising misstep.

“At the start, I wanted to have some merchandise that would allow me to have the lowest price point so I filled about 10% of my inventory with low-end furniture, electronics and appliances. I quickly found out that stocking merchandise of that kind only leads to service issues. I’ve been doing this 20 years but I am still learning. We really don’t sell price. We sell ourselves and we sell service. And if you do that right, you’re going to be successful. Our customers want good, quality things and they want to deal with someone they like. If you don’t do that, they will be your competitors’ customer real soon.”

Vadnais says his customer base has grown exponentially since his opening and he credits bilingual employee Carmela Ortiz for building a thriving Hispanic customer base.

“She is just phenomenal. I currently have about 125 Hispanic customers. Without Carmela, I’d be lucky to have ten. They come to her because she knows the language. They respect her and she takes care of their needs. It’s definitely a snowball effect. Hispanic customers are very loyal to the people they do business with. That’s not to say they are loyal to the sign outside. They respond to the people inside the store.”

Vadnais says Hispanic customers are responsible for nearly 25% of his business and he has acquired them the old-fashioned way.

“We don’t even have a Spanish sign in the window. Our fliers are printed in English, but they do carry the line that says we speak Spanish and to ask for Carmela. We have built that segment, and much of our overall customer base, by word of mouth.”

Vadnais is also thankful he hired another rental veteran, Dean Carusone, to work in his store.

“Dean is a longtime RTO professional with about 15 years of experience, including at the multi-unit level. We definitely would not be where we are today without him. Now we’ve got his fiancée Danielle – another successful RTO store manager with 13 years of experience. Thanks to my strong staff, we’re preparing to open our second store in the Syracuse area.”

When Vadnais opened his current location, he identified a two-mile radius as his main trade area. He believed that as the store could handle more growth he would expand the marketing program to a larger radius.

“Right now we go out about 4 miles around our store with mail campaigns. There are about 20,000 households within a 4 mile radius of our location and we believe as much as 75% of those households are potential customers. The beauty in running a rental store in the first year of operations is that you don’t have too many paid offs and returns. You can place a huge emphasis on gaining new customers and growing the business. And that’s what we’ve done.”

Vadnais’ approach has certainly worked well, with his store growing to more than 1,400 BOR and 800 AOR in the first 16 months’ of business. More than 70% of his customers pay weekly, and the rest choose to make monthly payments.

“We really don’t push the monthly model here. There is a small rate discount if a customer chooses to go monthly (equal to the weekly rate times 4.0 rather than 4.33), but it’s not usually enough to encourage more customers to pay monthly. We like to give the option to our customers and they can choose which plan works best for them.”

“One thing that has worked well for us is our referral program. Referrals get $25 cash and out of our 500 current customers nearly half came to us via referral. As a new store we need to keep our name out there but we can’t afford to spend a ton of money doing so. An active referral program is the way to accomplish that. I would rather take $2,500 and spend it gaining 100 new customers versus running commercials with that $2,500.”

Vadnais says the key to success is to consistently promote referrals and to always talk up the program with every customer, even if you think they’ve heard it before.

“If you don’t let up, it happens. You can get the 100 customers for $2,500.”

Vadnais is thrilled with his decision to become a rental dealer and isn’t looking back for a second.

“You can think about it and dream about it, but until it actually happens and you pull the trigger, I can’t explain how enormously gratifying it is to become an owner. You get up and you want to come to work. You want to take on the day. And at the end of that day when you realize that you don’t have to turn over the profits to someone else, it’s just a great feeling.”

Vadnais says he wants to share that great feeling with his customers, as well.

“I worked with a guy named Greg Heck years ago at Colortyme when I first started out in this business. He really showed me the right way to operate a rental store. You know how some stores have that electricity and you can feel it when you walk in the front door. It’s the hustle and bustle of employees, and there’s laughter and music playing. The employees are enjoying their business and their customers. That is what I aspire to with our company. I want our employees to have fun and enjoy every single day. I really believe the growth in our profitability will be a direct result of our employees’ job satisfaction and our customers’ satisfaction with the employees.”

Vadnais says his customer-focused approach extends to his merchandise buying habits, as well.

“I operate from a mindset that my customers will dictate what I carry and not the other way around. That’s what I love about being on my own. My customers get what they want.”

Vadnais regularly special orders items for customers who have spotted merchandise in traditional retail stores but could not qualify for credit.

“We don’t necessarily get into off-the-wall product, but if there is a particular make or model of an LCD television that a customer wants, we are happy to help them get it.”

When asked if Vadnais will branch out into newer product lines such as lawn tractors, he pauses just slightly before providing the perfect response.

“I don’t know about lawn equipment, but I definitely may get into snow blowers.”