Head Of The Fleet

To Tom Raynor, Fleet Feet is more than his 48-store franchise--it's a leading brand in the running specialty market

(Monday, July 21, 2003) - For a select group of retailers, Tom Raynor is the ultimate running coach. Since purchasing Fleet Feet Inc. 10 years ago, Raynor has been turning what was a team of underperforming running specialty shops into an all-star lineup.

In 1993, the average franchise store in the 27-year-old, 37-unit company was pulling in only $260,000 a year. Raynor, president and CEO, spent his first four years reorganizing and revamping 20 of the original stores. Today, there are 48 stores located in 22 states, and the average sales per store are $756,000. The company also launched an online retail division this month and has plans to open two more Fleet Feet stores by year's end.

Total retail sales for the 42 Fleet Feet stores in operation in 2002 were $32.5 million, a jump of 18.6 percent compared with 2001; comp sales for those Fleet Feet stores were up 11.8 percent. For 2003, Raynor is projecting a growth rate of 14 percent, with store sales in excess of $37 million.

Raynor, 52, said the success of Fleet Feet as a whole is the direct result of the work of each Fleet Feet retailer, who is responsible for using the Fleet Feet format as a template upon which to create a retail environment that caters to a specific running market.

Of the role Fleet Feet plays as the operation's corporate arm, Raynor said, "The biggest impact we have is making sure we get great owners, and help them where they need help. We are responsible for assisting and coaching the areas of weaknesses in the stores and helping those stores develop."

Raynor told Footwear News that the best potential franchisees would be individuals who have a passion for running and a desire to be part of a team. The 48 individual owners represent a carefully picked group; the company receives 1,500 applications each year for franchise requests, of which only five are accepted, he said. Each franchise owner must ante up $175,000 in start-up costs as well as 3 percent of total sales each month.

The average Fleet Feet store is 1,800 square feet and carries seven major footwear brands-Asics, Nike, Brooks, Mizuno, New Balance, Adidas and Saucony. In 2003, select locations also picked up running styles from Pearl Izumi and Reebok.

FN: What are the challenges faced by running retailers today?
TR: Customer satisfaction is not a good measurement anymore. Customers are satisfied by the retail experience, but that may not be a memorable experience. The challenge for us is to create a consistently memorable experience for the customer in our store. There are going to be a lot of running specialty stores going out of business in seven or eight years because the challenges are tremendous in terms of cost structures such as rent and personnel, etc. (A retailer) cannot afford to be the second, third, fourth store in your market. You'll be out of business.

In addition, I think that the biggest challenge we face is attracting people who are thinking about exercise and activity to lose weight. I don't think they think about us as a resource for them, and we should be, because we have the best sources for providing information to them and we can provide support to those just starting an (exercise) program.

FN: How will Fleet Feet address those challenges?
TR: One of the things we are always trying to figure out is what are the best practices in each of the categories that compromise total customer service. For example: How long does it take to check out? How easy is it to park? How good is the signage? I actually think our philosophy of customer service is what drives us. I absolutely believe that comes from the store owners. For us, total customer service (is when consumers leave our store) feeling like they have never been anywhere like that before.

Also, we've focused rally hard on understanding and supporting the fact that Fleet Feet is our brand. Nike and New Balance are not our brands; those are (companies) we do business with and have business relationships with. The only thing we can control is our brand, and our environment and our store. We think Fleet Feet can be the leading running specialty brand.

FN: What qualities do you look for in a Fleet Feet franchise owner?
TR: One of the first things we ask people when they want to open a Fleet Feet store is, "What are you going to contribute to the group?" Our (belief) is that we only get stronger as we bring better people into the organization, and the owners are a great way to bring them in. We've got people from accounting, science, technology and legal (providing) a wide range of expertise in the company, and we try to share that experience with all the stores.

FN: How do you share that information with 48 store owners across the country?
TR: One way is we hold business conferences for our franchisees. Our vendors pay us to bring our franchisees together to have an annual footwear conference during the summer. We'll invite seven footwear vendors to attend-Asics, New Balance, Brooks, Adidas, Nike, Saucony, and Mizuno-as well as emerging vendors. There is as much listening done by the vendors as there is talking. There will be 50 running specialty retailers at this (year's) meeting, and the vendors don't have that many chances to get in front of that many retailers at one time.

FN: Do you have a company-wide buying strategy?
TR: As a franchise company, we don't have a buying strategy. Each store has to develop its own strategy, and each store is responsible for its own orders. Owning inventory is a very difficult process for franchise companies. If you own it, then you have a proprietary reason to sell that product to a franchisee. We, as Fleet Feet, do not own any product. We do negotiate national buying programs with the vendors, which each store has the opportunity to take advantage of, but we don't force any of them to.

FN: How are Fleet Feet stores merchandised?
TR: Currently, 65 percent in footwear and 35 percent apparel and accessories. We think there is a lot of upside growth in apparel, and we believe that in the future, apparel and accessories could be 50 percent of our business. That would not be with a reduction of inventory of footwear, however.

FN: What is your most popular price point?
TR: The target zone where we sell most of the product has been $85-$95. We have some stores that sell higher-end shoes, but that is based on the customer and the owner.

FN: What is your top-selling brand?
TR: In 2002, Asics was the top seller in footwear; 20.6 percent of our business was Asics. They just barely (squeezed out) Nike. In addition, Brooks and Saucony had tremendous growth last year; up 40 to 56 percent.

FN: How has the running industry changed since you started with Fleet Feet?
TR: The growth of the cause-related events and training groups has brought new runners into the market. Women have been the explosive growth component, and there has been much more emphasis on the activity of running rather than the sport of running. Retailers are also more professional in their approach to the business of running, and the consumer has benefited.

FN: Who is the Fleet Feet customer?
TR: A person who is involved in the activity of running or walking, as opposed to the sport of running. The competitive runner is not our customer. When you look at the profile, 50 percent of our customers are women. That continues to be a great source of new, and younger, customers for us. Our consumer population isn't graying at the same rate as some other businesses are graying, like the golf or tennis business.

One of the areas we have not done a great job in is promoting sports activities in ethnic minority populations. That's a tremendous resource for us in the future. We can do a lot more with children and a lot more with people who are not even thinking about running or walking right now, but are thinking about weight loss.

FN: Who is your retail competition?
TR: Anyone who sells a running or walking shoe to someone who is walking or running is our competitor. That's everybody from Modell's to Lady Foot Locker. (But) I don't spend that much time thinking about the competition. I spend most of my time thinking about what we can do better. There is a competitive environment between our stores, and they continue to raise the bar for each other.

FN: You just launched shopfleetfeet.com in July 2003. Why?
TR: The way the customer shops has changed substantially in the last five years; 40 percent of our customers now also shop online for product. They are choosing to shop online for convenience, for selection and because of time constraints. Before, we were defaulting all that (online) business that we could be acquiring to companies that have online presentation. Now, we will get consumers who live near our stores who have never shopped in our stores. This gives us a way to identify them and also try to drive them to stores.

FN: Is the Web becoming a more powerful way to sell shoes?
TR: No. I think the Web is becoming a better conduit for product flowing to customers who already know what they want. I don't think it's becoming a better way to sell shoes. To sell shoes, you need to fit them, but if they are only getting satisfied in a retail transaction, why not shop online?

The Future of Fleet Feet
Fleet Feet President and CEO Tom Raynor outlined how he sees the next seven years playing out for the Fleet Feet team. In the company's 2002 annual report, Raynor predicted that by 2010:

The total sales volume will be about $124 million, and of that total, 20 percent will come from Internet sales.
Growth margins in the best-run stores will be north of 50 percent. Eight stores will have in excess of $2 million in sales annually. Three stores will exceed $3 million that year, two more stores will exceed $4 million, and one store will push past the $5 million mark.
Footwear will be 70 percent of the business, apparel 20 percent, and accessories 10 percent.

For More Infromation Please contact:
Tom Raynor
president and CEO

View all Fleet Feet Sports Press Releases

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