(Editor’s note: This story is drawn from a Nov. 16 BUSINESS JOURNAL conference
that focused on how Friedman’s Home Improvement positioned itself to successfully
compete with national retailers. The conference included Friedman’s President
Bill Friedman; Friedman’s CFO David Proctor; Jim Andersen, Friedman’s board
member and partner at Andersen & Co. CPAs; Richard Abbey of the law firm
of Abbey, Weitzenberg, Warren & Emery; and Barrie Graham, chief executive
officer of Exchange Bank, all Santa Rosa companies.)
NORTH BAY ? If you’ve lived in the North Bay long, you probably still call
it Friedman Bros. Hardware. But the independent, family-owned Friedman’s
Home Improvement, as it has been renamed, has survived increasing competition
from big box hardware stores by refusing to live in the past.
Instead, the company, poised to make its fourth generational transfer when
son Barry Friedman someday takes over from current President Bill Friedman,
has transformed from the inside out, adopting proven business practices of
larger corporations while maintaining the heart of the Friedman family’s
first hardware store back in 1946.
Bill Friedman’s father and uncle Benny and the late Joe Friedman opened the
first Friedman Bros. in Petaluma in 1946 and were “committed to hard work,
always treating the customer with respect and doing business ethically,”
values their successors have long sought to maintain.
The original Santa Rosa store opened in 1970 and grew to become the largest
single hardware store in the country when it was expanded to 100,000 square
feet in the days before Home Depot and Lowe’s reached national dominance.
Friedman Bros. was passed onto now president and CEO Bill Friedman and his
uncle Harry Friedman in the 1980s. Bill bought out Harry’s shares in the
company in 1999 ? transfer number three ? after opening the second and third
Friedman Bros. stores in Sonoma and Ukiah.
When Bill Friedman took over as sole owner, it became apparent that Friedman’s
had outgrown its existing business practices ? there was inconsistency among
the three stores, employees weren’t clear on procedures and some management
changes needed to be made.
But Bill Friedman felt there was one thing missing that was most important.
“It became apparent to me that we needed to rebuild the company from the
inside out, but first we needed to put heart back in the company,” Mr. Friedman
said. “Without heart, our company would not survive.”
Competition
For the last seven years, Friedman’s has embarked on a broad overhaul that
has led to a new brand identity, store renovations, focused employee training,
management changes, new comprehensive operating procedures and a host of
other improvements.
The company believes the changes will allow it to continue to compete with
the larger chains surrounding the homegrown store, even though another independently
owned hardware store sold to a national chain this year.
Home Depot purchased Yardbirds, the Petaluma-born hardware store with 10
locations, last year after 30 years of independent ownership. Home Depot
already has locations less than two miles south of Friedman’s Santa Rosa
location and 10 miles north in Windsor.
With Yardbirds’ purchase, the nation’s largest retailer could have four more
stores potentially surrounding Friedman’s. The nation’s second-largest hardware
retailer, Lowe’s Home Improvement, has a location 3.5 miles to the south
of Friedman’s in Cotati and has proposed another store a couple miles north.
Friedman’s said competition is inevitable, and what it has to do is use its
small size to its advantage.
“We wanted to be a smaller PT boat among larger aircraft carriers,” Bill
Friedman said. “We wanted to make smart, quick moves around our competition.”
The jumping off point
In 1999, Bill Friedman assembled the executive team that would bring the
company to its next level.
Included were Vice President of Merchandising and Marketing Tony Corsburg,
who has 30 years with the company; Vice President of Contractor Sales Bobby
Senften, a 37-year Friedman’s veteran; and Vice President and Chief Financial
Officer David Proctor, who has directed accounting for the past 21 years.
As a jumping off point, Friedman’s solicited market research in 2000 that
helped it define its customer, improve product selection and discover its
customers’ values.
“We received that information which not only told us how the market viewed
us, but how they viewed us measured against our national competition,” Mr.
Proctor said.
With the market research results, the company was able to define its core
values, including respecting the customer, the employees and the vendors.
Friedman’s knew it had to compete on price with the larger big box retailers
and crafted the “lowest price period” slogan. It put systems in place to
consistently measure its competition’s prices and make sure it was keeping
its word.
Friedman’s identified its strongest distinguishing feature: its ability to
provide better customer service than the competition. And Friedman’s worked
to ensure that it had superior customer service and link it in the minds
of its customers to a new brand identity.
“You can build a better brand identity, but if they come in and you don’t
execute, you might as well pack it up,” said Mr. Proctor.
Friedman’s had to improve its employee culture, create standard operating
procedures so employees knew what was expected of them and were doing it
consistently and invest in its employees’ training.
The company also hired an experienced training manager who runs ongoing weekly
training sessions as well as orientation. The training manager is working
with experienced employees who are writing new training guidelines and will
become trainers themselves.
The average sales associate earns more than $14 an hour. Cashiers make at
least $10 an hour. About 95 percent of Friedman’s 385 employees are full
time and earn benefits. But they’re also expected to know a lot about products
and procedures, and there is little tolerance for being late or missing work.
Employees must pass tests on specific products before they are cleared to
sell them. There are secret shopper programs that measure performance.
The high standards and incentives seem to be working. Friedman’s says its
turnover is less than half that of typical retailers.
Friedman’s also involved its employees in the company turnaround by surveying
them. The results of that survey produced solution work groups that identified
where the store needs to improve structure and processes. Three groups developed
and continue to develop processes for staffing, policies and procedures and
training. More than 80 standard operating procedures on subjects including
return policies, receiving inventory and training have so far been crafted
and all are accessible on the company’s intranet and are reviewed at monthly
meetings with managers.
On the management side, the company expanded its senior executive group to
include an operations manager to oversee all three stores.
“Before that, we weren’t sure if the same message got from Santa Rosa to
Sonoma or to Ukiah,” Mr. Proctor said.
And they added a human resources director to the senior management staff.
A new marketing campaign featuring the company’s employees, the new name
? Friedman’s Home Improvement ? and a new logo accompanied the grand reopening
of the Santa Rosa store, which underwent a major renovation completed in
2002. All messages on bold green signage within the store are in English
and Spanish. A remodel of the Ukiah store was completed in 2004 and the Sonoma
store is next, with a scheduled completion date set for 2008.
The renovation costs put a dent in the bottom line as a percentage of sales,
but profitability has been improving for the last several years, Mr. Proctor
said. Friedman’s had sales of $88 million in 2005 and is poised to improve
by more than 10 percent.
Barrie Graham, president of Exchange Bank, said Friedman’s is a unique customer
in that it’s survived so many generational transfers and that the loans the
bank has made to Friedman’s to finance its expansion are ideal.
“It went to a good purpose. It helped them to develop a good brand, to increase
inventory and, quite frankly, to grow sales,” Mr. Graham said. “They took
on debt and grew sales. We get paid back, and they increase revenue.”
Today there is no Friedman’s Web site, but an informational site is in the
works, with a planned rollout in 2007.
Friedman’s also opened its board up to two new members outside of the company:
North Bay accountant Jim Andersen and Art Simon, a distributor and consultant
whose family had owned another independent hardware store, Simon’s Home Center
in the East Bay.
The company continues to be involved in the community, committing money and
volunteers to local nonprofits. Its greatest contribution may be that the
company also supports local businesses.
“For us, community involvement goes beyond the charitable world,” Mr. Proctor
said.
He said Friedman’s supports local business because the company knows first
hand local businesses can compete with national chains in prices.
Friedman’s believes local businesses can provide superior service “because
we can access decision makers and people who deeply care about businesses
here,” Mr. Proctor said. “And we’re committed to local business because those
dollars stay in the community.”
Friedman’s business strategies are always evolving, with new training programs,
new operating procedures and new policies being crafted daily.
“And it’s not easy,” Mr. Proctor said. “We struggle with all of this.”
But the payoff is worth it, said Bill Friedman. “I’m excited about
the future.”
