Pawn 1 chain revises its expansion strategy
Company will close store downtown, move another; Lax buys out co-founderDecember 20th, 2002
Pawn 1 Inc., the Spokane-based pawn-shop chain that launched an aggressive expansion strategy seven years ago and grew to nine stores, now is scaling back its growth plans after experiencing cash-flow problems of its own and ending a lengthy courtship with a prospective buyer.
We can have a very strong regional presence without opening X number of stores, by focusing on serving rural communities within a 150- to 200-mile radius of Spokane, says Mark Lax, the companys president. Thats my goal now. Its not to become that 30-, 40-, 50-, or 100-store chain.
Pawn 1 is revising its strategy to reflect the tighter focus, and expects to begin implementing that plan next year, Lax says. As part of the plan, the company hopes to open its fourth Idaho store, in the Lewiston area, by next summer and its fifth, in Sandpoint, by the spring of 2004, he says.
Meanwhile, in Spokane, Pawn 1 plans to close its 6-year-old downtown store, at 401 W. Main, due to lagging sales, and to move a 9-year-old North Side store, at 7102 N. Division, to a larger space at 8014 N. Division, next to a Magnolia Hi-Fi outlet. Lax says the downtown Pawn 1 outlet will close by the end of March, and possibly sooner if he can find a business interested in subleasing the space.
Thats the flagship store. Thats the sad part of this, he says. However, he adds, It just doesnt make sense financially anymore to keep it open, due to a lack of customer traffic. Pawn 1 opened the store in 1996 after buying the assets of a competitor, Washington Jewelry & Loan, which had occupied that space.
Lax says hes excited about the relocation of Pawn 1s high-grossing North Division store into the 8,200-square-foot space next to Magnolia. Its expected to open there by Feb. 1, after about $200,000 worth of remodeling work is completed, he says. George Doran Contractors, of Spokane, is doing the work, he says. That store will become Pawn 1s second superstore, he says, joining the companys Hillyard store, which occupies a 12,000-square-foot building that the company built three years ago.
Lax will be calling all of the shots as Pawn 1, which employs about 60 people and had revenues of about $5.5 million last year, embarks on its new path. He says he is buying out co-founder Mark Silvers interest in the company, and expects that transaction to be completed by the year-end.
Silver, who is Laxs cousin and had been vice president in charge of new development, says he plans to pursue other professional interests, but declines to elaborate. Silver and Lax had bought the interest of another investor in the company, family friend Lewis Rumpler, a couple of years ago. Rumpler, who had been Pawn 1s chief financial officer, now is at Spokane-based Inland Northwest Technology Education Center (Intec).
The three men had worked closely in 1995 to develop a fast-growth business plan for the company and to give the pawn chain a more professional look. They computerized store operations, strengthened credit relationships with local bankers, improved employee training, and sought to consolidate the companys corporate identity under the Pawn 1 name and logo. Through the expansion, they hoped to position the company to compete effectively against a number of large, publicly traded pawn-shop chains that had sprung up elsewhere in recent years, or to make it a more attractive acquisition candidate for one of those chains.
However, in opening a number of attractive new stores in the late 1990s, he says, We outspent ourselves and couldnt keep up. Also, finding people to staff the stores who possessed the mix of talents the job requires turned out to be a big obstacle, he says. Then, when loan business softened and cash grew tight over the last couple of years, It was just a cold bucket of water in the face, he adds.
From January through September of this year, Pawn 1 was involved in sale negotiations with SuperPawn Inc., a 39-store Las Vegas-based pawn-shop chain, but those talks fell through when the two sides couldnt reach agreement on terms, Lax says. The two companies retain a good relationship, though, and, They are the ones we want to use to try to set the high bar operationally, he says.
While retaining a strong relationship with Washington Mutual Bank, Pawn 1 recently has been exploring additional financial options with the assistance of Portland-based consultant JMW Capital Partners Inc., Lax says.
They have been a huge help trying to build a new financial structure for Pawn 1, Lax says. Its a big boost for our organization as I continue to seek new capital. We hope to put a new footprint together here.
Reflecting on all of the recent changes at Pawn 1, Lax says, Its a bit of a rebirth for the company. He says he is committed to operating the company here over the long term, because he enjoys the business and has been involved in it all of his life, and he adds, I want people to think we do set the standard for our type of business, no different than Starbucks or whatever.
Pawn 1s other stores are located at 3220 N. Monroe and 3023 E. Sprague in Spokane, 11812 E. Sprague in the Spokane Valley, 2011 E. Seltice Way in Post Falls, 926 N. Fourth in Coeur dAlene, and 7719 Government Way in Hayden.