Aaron Rents Inc.

When Charles Loudermilk started Aaron Rents in 1955, he had reasonable expectations. “I thought if I ever got to $1 million in rental income, I would be on top of the world,” he says.

He never anticipated what was ahead. This year, Aaron Rents system- wide revenues will surpass $1 billion. “That’s beyond my comprehension,” he says.

Today, Aaron Rents Inc. is a leader in rental, lease ownership and the specialty retailing of residential and office furniture, consumer electronics and home appliances. It has more than 700 company-operated and franchised stores in 43 states and Puerto Rico.

Aaron Rents, based in Atlanta, has three operating divisions involved in sales and lease ownership, rental and furniture manufacturing.

Almost 50 years ago, Loudermilk was working as a traveling salesman for a pharmaceutical company when he noticed a small rental company in Greensboro, N.C. A few years later, he came back to Atlanta to go into the restaurant business with his mother, but he later decided he wanted to start a rental company.

He says renting chairs were the biggest attraction at the time. “I borrowed $500 and bought used Army surplus chairs and rented them for 10 cents a day,” he says.

To get off the ground, at the age of 27, he says he put an ad in the phone book and set up an answering service. “That’s how I got the first order,” he says. “I didn’t know what to rent, so I started out saying `Mr. Aaron rents almost anything.’”

After he placed commercials on the radio, Loudermilk recalls, he started getting a lot of calls.

He hired a friend’s mother to answer the phone, and when orders came in, Loudermilk says he would go to a wholesaler or retailer to buy the product. Those included tables and chairs and other furniture. “It just grew from there, whenever the phone would ring, we would take an order,” he says. If items rented well, they would buy additional ones. If they didn’t rent, they would be disposed of. “It wasn’t a real big gamble. We didn’t put a lot of money into it. I didn’t have any money anyway,” he says.

The company rented many things, even tools. But furniture eventually became the focus of the company.

However, Loudermilk says he ran into the problem of not being able to purchase furniture quickly enough for demand when Lockheed Martin was gearing up to build the C-5A. The airplane project brought many people to the Atlanta area in the late 1960s. “These people from all over the world were coming in to work on that plane, and Atlanta had very few furnished apartments. Therefore, they needed to rent furniture. The demand was very strong.”

Loudermilk says at times the company had practically nothing left in its showrooms or warehouses. “But we delivered whatever we had,” he says.

At that point, he decided that the company needed more control over its destiny, and Loudermilk acquired a furniture manufacturing plant. “That’s why we got into the manufacturing business,” he says. “It was by necessity.” Aaron Rents now has six furniture plants and nine distribution centers.

Loudermilk says the company now is capable of delivering large amounts of furniture in a very short time. If a hurricane strikes the Southeast, for example, Aaron has a lot of furniture to handle a sudden need. “We can respond quicker and to larger demands than anyone else in the business, by far,” he says. “That gives us a leg up.”

The company was originally only a rentto- rent operation. People had no interest in eventually owning the merchandise. But the rent-to-own concept evolved, as demand for rent-to-rent stopped growing.

And, at the same time, Loudermilk claims Aaron Rents became disappointed by how its competitors were treating its customers. “There’s been a lot of lawsuits, state and federal fines and unethical behavior” for such misdeeds as hidden prices and false advertising, he says. “We decided we would get in the business, but we would change it dramatically. And that’s what we’ve done. We have really changed our way of operating into more like a credit retailer.”

Loudermilk insists the company wanted to help its customers and treat them with respect. Aaron Rents’ target customers include about half of all American families, mainly those with lower incomes.

“A lot of these people simply – for one reason or another, and a lot of these reasons are very legitimate – don’t have the available credit to buy,” he says.

Aaron Rents’ biggest items right now are big screen TVs, which rent for about $110 a month, for 24 months to own. It has about 106,000 out on rent right now, along with about 35,000 home computers.

Loudermilk admits that it is a strange concept for the company to deliver such expensive items to people who pay only one month’s rent with no delivery fee or security deposit. In fact, he says many retailers have told him over the years that Aaron Rents’ system cannot possibly work. “They say you can’t deliver a $1,100 big screen TV to someone’s house for a one-month contract,” he says. “And I tell them, `Maybe it doesn’t work, but it works for us. It has for a lot of years now, so we’re not going to change it.’

“But it is kind of wild. We’ll deliver a computer that costs $900 to a person for a one-month contract,” he continues. “But we do it every hour of every day, thousands of times.”

Loudermilk says the company’s loss is only about 3 percent or less. “It’s a matter of how well our stores collect,” he says. “They have to tell the customers, `You rented it, if you don’t pay it, we’re not going to renew your contract for the next month’s rent.’ Frankly, that’s not as big of a deal as you might think. If they can’t pay the rent, they’ll call and say, `Come pick up the big screen TV.’”

And Loudermilk says the company will work with customers if they have financial problems. He says the most successful locations are in small towns where the local store personnel get to know customers. “Customers appreciate that,” he says. “They appreciate someone who will work with them.”

He says 82 percent of customers come back for another item after they pay out an item at Aaron Rents. “That shows you that they’re happy with the item and the pricing, and the way we handle them as a customer,” he says. “We give them respect.” The company does not do credit checks on customers, but it asks for five references. “If somebody disappears or moves, we’ll call one of the references,” he says.

Bank Relationships

The biggest obstacle to the company's growth has been financing, according to Loudermilk. “For the first 20 to 25 years, banks simply wouldn’t loan any money to speak of,” he says.

With the company’s only collateral being used equipment, banks thought it would be hard to get their money back if something went wrong. “But down the line, banks started looking at it as a customer base that is paying us every month,” he says.

Aaron Rents eventually struck a deal with General Electric Credit,which began lending the company money. “It allowed us to grow,” he says.

Today, Loudermilk says the banks want to lend it more money than it wants to borrow. Aaron’s has $120 million in unused, available credit, he says. “If you talk about the future, we have a program that is working extremely well,” he says. “Our employees like it, and our customers like it. And we’re growing at about 20 percent a year.”

He says the company’s real estate department has identified 1,700 additional locations where it could operate. In addition, he says the company now has the available capital to grow as much as it can.

Loudermilk says the company doesn’t have to do a lot of promoting to attract customers, because it has “top-of-the-line” products, such as stainless steel front refrigerators, Sony big-screen TVs, leather sofas, chairs, loveseats and Bose sound systems.

“People really want what we’re offering,” he says. “With our lease-ownership program, we offer them the chance to get it.” Loudermilk says the company has 240 opened franchise stores, and it has sold close to another 200 which should be open within the next three years.

What Slow Economy?

Loudermilk says others have asked him how the company has grown so much in the last couple of years with a slow economy – at more than 40 percent in the last two years. But he says he doesn’t really see the slow economy. Loudermilk says he sees the American business world leveling off to where it should have been in the “roaring” 1990s.

Unemployment in the United States is about 5.6 percent, Loudermilk notes. “That’s pretty good for this country,” he says. “I’ve been in business for a long time, and that’s pretty low. Inflation is very low.”

He says people have jobs and the ability to pay. In addition, interest rates are low, so people can buy the big-ticket items, such cars and homes. “I don’t see the economy as bad as the papers seem to say,” he says.

“I think if we don’t watch out,we’re going to psyche ourselves into a recession,” he says. “I think people are living better than they have in the history of the world.”

NASCAR

Although the company doesn't publicize itself much, it does take a visible spot in the world of auto racing. Aaron Rents has been involved with NASCAR for many years, sponsoring the car of Michael Waltrip. “We found out that [the NASCAR] customer base is our customer base,” Loudermilk says.

Waltrip, along with his brother Darrell, are the company’s spokesmen, and the company has a long-term relationship with the Waltrips. In addition, Aaron Rents sponsors the cars of Kerry Earnhardt and Shawna Robinson.

“Our suppliers – the RCAs, the Sonys and the Maytags – help us finance that,” Loudermilk says. “We put their logos on the cars.”

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