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Ground Floor Opportunity

[ 0 ] Jul. 1, 2008 | SBO Editor

The first Tile Outlet Always in Stock® opened in Sacramento, Calif., in Nov-ember 2001. Within three months, customers were arriving in droves to buy first-quality ceramic and porcelain tile and stone products at wholesale prices.

Founder Doug Disney had spent 10 years working for two major tile distributors before setting off on his own with a healthy dose of both industry expertise and entrepreneurial zeal, soon realized what his next step would have to be.

As a 19-year-old, Disney had started his own business called Yachtin’ America, in which boat owners across the country agree to swap boats while on vacation, similar to popular home-exchange programs. But now that Disney was in the tile industry, there was no doubt he had the drive and desire to succeed on his own.

That’s when Disney came across the book, “Start Small, Finish Big,” by Subway co-founder Fred DeLuca. The book contained DeLuca’s 15 key lessons to start and run a small business.

“I read the book in two days,” Disney said. “It made me realize that I already had a great concept, but that franchising was a much better alternative for growing than opening my own stores.”

Disney put the lessons he learned to good use when he began franchising in 2002. Today, Tile Outlet Always in Stock is not only one of the fastest-growing consumer goods franchises in the western United States but it is positioned for national growth as well. Tile Outlet is the only franchised retail tile concept of its kind with 65 locations in eight western states.

Disney’s strategy from the start was to systemize the process of bringing imported products to customers at the lowest overall prices in the marketplace.

The result is average savings of 20 percent on tile and stone products and as much as 70 percent on prefabricated granite countertops when compared to the cost of traditional installation.

“The no-frills showroom and low overhead allows us to offer outlet pricing,” Disney said. “But nothing we offer is discontinued or closeout products. It is all first-quality imports and we pass on the savings to our customers.”

The company-operated distribution centers range from 4,000 to 25,000 square feet in size and are in Rancho Cordova and Ontario, Calif., Portland, Ore., and Salt Lake City. Additional distribution centers are expected to open in Houston by year’s end and Phoenix in early 2008. It’s a great combo.

“Our main priority is to get distribution centers open across the states,” vice president Chris Nezebeth said. “As we do that, we’ll begin expanding into areas outside the western states.”

Dovetailing with that strategy, franchised expansion to the East Coast will first be preceded by the opening of a compay-owned distribution center in that region.

The estimated initial investment for a Tile Outlet franchise is moderately priced from $64,350 to $124,800 and a descending royalty structure rewards franchisees for strong sales. About 80 percent of Tile Outlet franchisees are owner-operators and 75 percent operate or have committed to opening more than one location.

Current franchisees run the gamut from former engineering and IT professionals to real-estate brokers and former Air Force fighter pilots. Only one of the chain’s current franchisees has a direct background in the tile industry.

Retail locations average 3,000 to 5,000 square feet in size and are typically located in “hybrid” retail/warehouse centers that might also include a service provider such as a paint or tire retailer. Such locations often have good retail exposure but rent typically averages 75 to 80 cents per square foot compared to $3 per square foot for a prime fast-food restaurant site.

Adds Nezbeth: “If our franchisees only get 10 to 15 customers per day, they will have a successful store. If you have a fast-food concept you need customers coming through the door all day long to be successful. Our average customer spends $500. If you just make four sales a day, you’re doing fantastic.”

Another plus for franchisees who might be leaving corporate jobs but don’t want to endure the grind of long retail hours: Most Tile Outlet stores are open 9-to-5 weekdays and 10-to-4 Saturdays. “They’re basically normal banking hours,” Disney said. •

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Category: Magazine, Small Business Opportunities, Small Business Opportunities July 2008