Golden Gates; RTO Magazine Profiles Rent to Own Industry Icon Bud Gates

Crossing the bridge between franchisor and franchisee has become second-nature for rental industry legend and former Rent-A-Center CEO Bud Gates. This time, Gates has announced his intent to serve as master U.S. franchisor of the successful Canadian easyhome rental concept. Those who have followed Gates’ career know this is a competitor who never does anything small, and the easyhome deal will be no exception.

In a career that spans nearly forty years, Bud Gates has had the chance to pretty much be anything he wanted. From an early start as a popular math teacher in the town of Weston, Massachusetts before paying his way through the storied Harvard MBA program, Gates has embarked on a one-way road to success.

In 1974, Gates was recruited by PepsiCo as Associate Business Manager for Wilson Sporting Goods. He served in various marketing positions over the next five years leading to the role of Business Manager of Athletic Footwear, overseeing a $30 million category with responsibility for product and package design, advertising and promotions.

Then, perhaps as a nod to his experience working in a family restaurant while growing up in Bolton Landing, New York, Gates transferred within PepsiCo to its Pizza Hut division. A successful six-year career culminating in the position of Senior Vice President of Marketing fueled Gates’ life-long passion for the food service industry, which continues to this day.

As the Chairman and CEO of Gates Enterprises, Inc., Bud Gates oversees a diverse portfolio of companies that until recently included Pizza Hut franchises and Rent-A-Center and ColorTyme franchises.

"I’ve had the unique opportunity to be both franchisee and franchisor for the same organization. At Pizza Hut and then at Rent-A-Center, I worked for the franchisor then became a franchisee. I’ve seen the world twice on both sides (of a franchise organization)," said Gates. "It gives me a tremendous appreciation for a well-run franchise system."

In fact, it was when Gates left Pizza Hut in 1985 to become Executive Vice President of Rent-A-Center, Inc., that he first became a Pizza Hut franchisee. He remained one until this past January, when he sold his nine locations so that he could focus on his three-year-old restaurant endeavor, B.G. Bolton’s.

"It’s done well in Wichita, as part sports bar and part family dining concept with really good food. But I’ve always felt it needed pizza to round out the menu, but I couldn’t sell pizza since I was still a Pizza Hut franchisee."

With that hurdle out of the way, Gates will eventually move forward with franchising the B.G. Bolton’s restaurant concept. A first franchise is already open in Edmond, Oklahoma, a suburb of Oklahoma City.

While it might seem unusual to be overseeing the development of multiple franchise concepts within one company, it’s all in a day’s work for Bud Gates.

Gates spent 11 years (1985-1996) at the helm of Rent-A-Center, steering the nation’s largest rental company through incredible growth but also through some challenging times. There was the 1987 sale to Thorn EMI Home Electronics (UK) Ltd., which could have stirred major cultural issues between the new British owners and their predominantly U.S. employees were it not for Gates’ strong relationship-building skills.

Once things were running smoothly under the new ownership, Gates had to deal with the fallout from the infamous Wall Street Journal expose piece where undercover reporters gained access to a Rent-A-Center annual meeting and categorically skewered the company and its efforts to provide merchandise to hard-working but credit-constrained consumers.

"Seeing that piece by the Journal was like being punched in the stomach. Anyone who knows this business knows we serve – and the key word is serve – a lot of people who have nothing. But we also serve people who choose RTO as a source of the things they want and need for their homes. When a business is run right, and someone attacks you with lies like the Wall Street Journal did, it’s hard to describe what that was like. Two-and-a-half weeks later they printed a major retraction. But although they raked us over the coals on the front cover above the fold, the retraction appeared on the lower left corner of page 39."

Fortunately, Gates hasn’t let experiences like that detract from his affinity for the rental-purchase industry. After leaving RAC in 1996, he continued his affiliation as a franchisee, owning and operating both Rent-A-Center and ColorTyme stores throughout New York State for nearly a decade, before selling them just last year.

So – after less than a year out of the rental business - what is it that has lured Gates back?

"For starters, I had a stake in RAC as a shareholder when we were acquired by Thorn. But it was nothing like this opportunity with easyhome. When you spend ten or twenty years in an industry you feel you need to leverage that experience. It’s the best place to leverage your talents for rewards – particularly the psychic rewards – because you really know what you are doing."

Gates feels the rental-purchase industry affords unique operational requirements for managers and store employees that may explain why so many keep coming back.

"RTO is an extremely entrepreneurial business. Despite all the training and all the merchandising plans, the pretty hefty decisions of do I rent to this customer or do I pick this merchandise up are all made at the store level. The latitude, the control that the individual has within a rental store, is something you don’t find in many businesses. Most other businesses are just transactional. You implement a specific system or sell a specific product. I suppose after you’ve worked in a rental environment everything else seems boring."

Gates’ affinity for the rental business was just one reason he decided to team up with the Canadian easyhome operation as a master franchisor for 38 states throughout the U.S.

"I knew easyhome was doing really well and that their level of execution alone was a point of difference. There are companies that do some part of this industry well, but easyhome seemed to have the total package. Everything from the most basic thing of all – training – that is entirely interactive with no paper manuals at all, to all the other functions on the corporate side – IT, marketing, purchasing, merchandising, you name it, takes a great practical look at the business. Easyhome doesn’t have that organizational hierarchal filter that stops people from admitting when things aren’t working. These guys are nimble and they execute. There is nobody out there that executes like this. Nobody. When everybody catches up, it will be too late."

Indeed, Gates has predicted the rental industry is on the verge of another wave of consolidation plays.

"When the dust settles years from now there’s still going to be a Rent-A-Center and there’s still going to be an Aaron’s. But a lot of the smaller companies and the independent-type owners will fall by the wayside unless they can execute at a high level."

"For every good, solid operator that has contacted me, I’ve had two investors wanting to get involved. It will be a question of putting those people together. One strategy will be to identify good, small operators and provide them with the easyhome template in which they can thrive. We can take a solid three to four store operator and couple them with a financial investor who can help them grow to ten to twenty stores."

Gates says there is some commonality to what makes a successful franchise work, and that it really doesn’t matter if you’re renting a sofa or selling a pizza.

"A good franchisee does the same things, regardless of the business. You choose good sites, hire the right people, aggressively market your business, operate the heck out of your proposition, keep a keen eye on your customers and your competition, you stay nimble and make certain you are well capitalized. When I ran Rent-A-Center, some of the best franchisees were also Pizza Hut franchisees. There was a lot of cross-over."

Gates says he has seen stellar franchisees that fit one of two models – the franchisee who is more of a financial partner hiring the right people to run his or her business and the franchisee who takes a hands-on approach to daily operations. And Gates has already decided how he is going to approach easyhome’s franchise operations strategy.

"There is more than one way to skin a cat. There are absolute A Players in each model. But my whole tactic with easyhome is to be involved strategically. I plan to hire great people, give them a culture, give them incentives to perform, a plan to execute against, and allow them to thrive."

Gates speaks with authority as someone who was a hands-on operator during his tenure at Rent-A-Center and also while he was a ColorTyme and RAC franchisee.

"The devil’s in the details of this business. In the early days of rental, if you could rent and collect you could be successful. That’s no longer the case."

That’s not to say that the basics are no longer important, and Gates has some words of wisdom for rental store operators interested in improving their collection numbers.

"Collecting is much harder than renting. Yet people make the mistake of feeling that collecting involves this individual relationship between the customer and the collector and that’s not really it. It is about the total relationship between the store and the customer. If the customer has been treated well – if the delivery was done right and any problems were promptly taken care of – the customer gets this warm feeling about their relationship with the totality of the store. That relationship will help in the resolution of any collection problems that come up. If the customer feels and trusts that relationship, they will want to work out any problems instead of hiding from you for two weeks and making it worse. They will trust that they can work it out. That tonality is set by the organization and by the store manager. That manager needs to let every person know that we are going to treat customers right and every employee needs to be on that program."

Gates emphasizes that he likes to use hiring profiles before settling on a candidate. So what type of person makes a good collector?

"Someone who is hard-working and has empathy for the customer who can come at the situation with the attitude of ‘how can I resolve this best for both sides’. He or she has to have that instinctive sense of what will work and what will not. They need to know when to hold ‘em and know when to fold ‘em, so to speak. And they need to be able to think quickly to help the customer come up with a suitable Plan B or even a Plan C when things aren’t going well."

The word may take on a whole new meaning within the rental industry, as the launch of easyhome in the U.S. is planned to be anything but easygoing.

"This is no small endeavor. Easyhome is basically tripling their territory as they march toward a disciplined and aggressive store opening plan. There is no pre-set ratio between the number of franchise stores we want versus company stores. We’re at the starting gate and it’s going to be a horserace. We know it’s important to have both company-owned stores and franchise locations to give the franchisor credibility. The franchisees need to know the company is experiencing what they experience. If you only operate company stores you miss out on a wealth of knowledge from your franchisees. If you only operate franchised locations, you miss out on first-hand knowledge of the business. The balance of having both is what’s key."

Gates believes the easyhome concept will be the next big thing in the rental industry, and his approach to growth is both calculated and confident. And coming from someone with Bud Gates’ track record, it also sounds like a done deal.

"We are not out to sell franchisees. We’re going to create successful franchisees. This will be a 1,000 store operation within the next ten years."

RTO Online is the official channel for Rent-to-Own Industry News and the only independent source of news for the rent-to-own, rental-purchase, lease-purchase trade. RTO Online (Rent to Own Online) represents the choice of the entire RTO Industry for trusted information, as it happens.

Tell us what you think
Rate the article at the top of this page