"High Lonesome” doesn’t just describe bluegrass music. It also looks like Idaho.
The state has the same population as Manhattan, but Idahoans are spread over 83,570 square miles, putting the state 44th in population density. Houston’s Harris County recorded 4.5 times as many building permits as all of Idaho in 2014. Some jobsites are so mountainous and remote that you have to deliver the goods via helicopter.
High, dry, and out of the way, Idaho isn’t an easy place to run a multi-unit LBM operation, let alone an industry-leading one. But for 40 years, Franklin Building Supply has embraced that challenge.
ProSales picked Franklin Building Supply as our 2016 Dealer of the Year because of how it shines in the award’s key criteria: operational excellence, financial excellence, and service to the local and dealer communities. The 16-unit company arguably does more things well over a more diverse territory than just about any other company. It operates in both a fast-growing urban area and in small towns. It has yards serving wealthy ski resorts and low-wage, Spanish-speaking agricultural communities, plus one branch in a Nevada town that thrives or starves depending on the price of gold mined there.
Franklin runs award-winning standalone showrooms, several truss plants, six door shops, a wholesaler of roofing and sheetrock, a millwork shop, a custom cabinetry firm, a granite fabricator, and units that install goods as varied as insulation, cabinets, floor coverings, doors, and wood stoves. It sells bags of its own Franklin-branded concrete mix. Its TV ads have won national prizes. (See some examples.)
Commitment to Grow
Amid all that variety, Franklin keeps its focus on continual improvement. Scott Ericson, a former Parr Lumber executive who now is a co-partner in the consulting firm Wheelhouse 20/20, recalls first meeting Franklin president Rick Lierz in 2010.
“He said, ‘I don’t accept “That’s the way it’s always been done.” We’re going to double down,’” Ericson quotes Lierz. “‘We’re going to start marketing and investing in employees, in our customers, and in our vendor partnerships.’ There was that commitment to creating a vision. They were not afraid to move out of the status quo and to move ahead ... [even where] in rural markets, some traditions lay heavy.”
Ericson calls Franklin Building Supply notable for the operational data it collects and then shares with staff. “The visibility and accountability in that organization is really unique,” he says. “That’s how you make change: You have to be able to see what’s happening and track and monitor that, and then hold people accountable when your vision isn’t being implemented.”
Lierz is a disciple of OTIF, for On Time in Full, a metric championed by consultant Ruth Kellick-Grubbs that tracks the percentage of a company’s deliveries that arrive on time and with everything promised. He and CFO Rhonda Millick, his sister, also have embraced secondary metrics like delivered gross profit dollars per delivery truck.
“We’re working hard on whittling that down and getting our managers into the mindset of [thinking] ‘You don’t need to have that many trucks,’” Millick says. “We’ve been selling old, parked trucks and are implementing a logistics system that will help us chisel that number down further.”
Frugality has been part of the company ever since February 1976, when Rick and Rhonda’s father, Dick Lierz, teamed with Bud Fisher to pay $1.6 million for what once was known as the Poor Boy Lumber Co. The yard was meant to be a sideshow to Dick’s work for Boise Cascade, but in just two months, Dick came on full time. “My heart followed my money,” he says.
Much of Franklin’s subsequent growth came on the installment plan rather than through big down payments or potentially crippling financing. That philosophy probably saved Franklin when the housing crash reached Boise, slashing housing starts by 70%. Revenue melted from a peak of $227 million in 2007 to a low of $68 million four years later.
“When we had the good years, we didn’t waste money,” Dick says. “We spent it on equipment: forklifts, trucks, facilities. So when the downturn came, we didn’t have to spend on capital then.”
Even with that boost, all senior officials took massive pay cuts, the employee count shrank 70%, and Dick stopped charging rent on some properties. “We managed cash flow like maniacs,” says Rick, a former attorney.
Life is better now—2015 revenues came in at about $111 million, with net profit close to 5%—but Rick aims to keep up the pressure; he wants a 10% net. Geographic expansion probably isn’t in the cards, as the company has stuck to Dick’s original notion of never expanding so far that you couldn’t drive home that day and sleep in your own bed. Rather, Franklin is going big into lean manufacturing and management processes.
The start was bumpy. “We’re in an LMC roundtable,” Rick says, referring to Lumbermens Merchandising Corporation, “and a group came to visit in 2010. One member is into prehung doors, and he looked at our operation and said: ‘You know, you’re not lean.’ I went back to my door manager and said: ‘Find out what lean means.’”
What was discovered is transforming much of the company. Rick hired a lean champion and put him to work improving the company’s door shops. The aim is to cut lead times from four weeks to three days, and reduce waste in the process. Franklin also has embraced such simple gains as kanban cards—plasticized cards slipped low down into pallets of materials. When enough materials are taken off the pallet, the card is exposed and gets taken to the office. Then it becomes a physical reminder that it’s time to restock or reorder as well as a rough indicator of where inventory stands.
Wide Base, Tight Focus
Franklin Building Supply gets its name from its home base on a road that extends west out of Idaho’s capital city. While urban Boise is much closer than it was then, the area still is rural enough that horses graze in a pasture across Franklin Road from the flagship store.
To an outsider, Idaho feels like a rambunctious teenager undergoing a growth spurt. Its vast geography and youngish demography mean Franklin is terribly widespread in where and what it does. But it also helps explain why Franklin is so limited in its core business: helping smaller builders put up single-family houses.
Outside Boise, most pros erect at most a dozen homes per year; even in Boise you probably know personally the person who built your home, Rick notes. Installed sales mainstays like providing framers aren’t that big here, especially outside Boise, but Franklin has done well installing siding and insulation. Revenue from those operations accounts for 11% of total sales. Commercial work is largely limited to the wholesale operation, and multifamily (again, primarily in Boise) is something the company has only begun to consider.
For all its focus on the small builder, Franklin doesn’t assume it knows what its customer base wants. To the contrary, in 2011 the company hired Wheelhouse 20/20 to survey all of Franklin’s top customers, asking emotion-driven questions like “Does Franklin Building Supply make you feel important as a customer?” and “How responsive is our company to your concerns?”
Those results were married to a separate secret shopper program that Ericson organized. His team checked for 16 categories of customer service, rating sales people, for instance, on whether they stressed the company’s service options or instead jumped straight to a price quote. Franklin then took the data and implemented a training program. And it has continued to check how well its doing by commissioning surveys again in 2014 and 2015 as well as more secret shopper visits.
Safe at Home, on Road
There’s no mistaking Franklin’s commitment to safety because there’s no avoiding Willie Everlast. Willie is a life-size, rubberized poster of a crash-test dummy that can be found all over the place, chronicling with Velcro balls the places on staffers’ bodies where they suffered accidents.
Nearby, most times you also can find a box labeled “Near-Miss Tracker.” Basically, it’s a file in which staffers are encouraged
to report instances in which something bad almost happened. Franklin is running a contest in which the department with the highest number of near-miss reports as a percent of personnel gets to throw a pie
in Rick’s face.
Willie isn’t the only safety program. On New Year’s Day two years ago, Franklin became a trendsetter when it barred employees from using cell phones while driving. It’s a total ban: Drivers can’t take or make calls even if the vehicle permits hands-free use. In a state as wide open as Idaho, this seriously curtailed outside sales reps’ telephone time. “We had to figure out ways for customers to have access during [OSRs’] windshield time,” Rick says. “We identified people in our locations to be the first responders for customer calls, and we worked to implement those solutions before we went live. The solutions were varied; in our larger locations we added inside customer support for the outside salesmen.
“In all, I think we improved our accessibility,” Rick adds. “Our salesmen have always had a lot of windshield time—this is the wide open West after all! To give the outside folks some relief from the constantly ringing phone actually helped all around. Customers became fans quickly of calling another number to get help, without in most cases going to voicemail and waiting for a callback from a salesman. Some salesmen were nervous for a while, but they are now fans. In fact, they tell stories of all the bad drivers out on the road who are using their devices while driving.” Franklin has joined with several other local companies in Boise to promote a “Just Drive” campaign.
Franklin also stands out for its training, in which safety education and a no-blame policy are emphasized early and often.
Family Style, Individual Roles
East to west, you’ll hear Franklin people say their company is like being in a family. “Rick and Rhonda and Mike truly care about their employees,” said Ken Leavitt, manager of the branch in McCall, Idaho, a twisty two-hour ride north of Boise. “It’s personal to them. If they lose a good employee, it’s not ‘Oh well....’ They feel the pain.”
“We’re big enough to be competitive, but still have that small-business feel,” adds Jay Tegethoff, manager of the Burley, Idaho, yard. “You mean something here.”
That loyalty gets paid back in myriad ways. Leavitt says he often will come to the store on Sundays to apply a weedeater along the highway berm. Tegethoff and his store’s team built Burley’s showroom pretty much by themselves on nights and weekends. Glen Parnell, based in Twin Falls and regional head of Franklin’s eastern yards, recalls how all the managers took steep pay cuts during the housing crash to help limit reductions in the number of employees.
“We sacrificed because we believe in the product,” he says. “And the owners cut more.”
Franklin tries to regard each branch and product section as an individual business, and management pushes to have each line chief manage that business as his own. But there are limits to that individualism. Ever the reader, Rick noticed that one former ProSales Dealer of the Year paid out branch managers’ bonuses based solely on how their own store did, while another Dealer of the Year based it on how the entire company performed. Rick’s solution was a 50-50 package based on both.
Caring about technology comes naturally when your hometown includes such IT giants as Micron and Hewlett-Packard. Franklin first acquired hardware in 1985, and after decades on what is now Epicor’s ECS Pro it has mastered the art of pulling custom reports and going electronic with payables, receivables, and financial reports.
Logistics and customer relations software are only now being installed, though given how far apart the yards are there hasn’t been much call for an integrated routing system.
It’s coming now, though, and Franklin has gone sort of rogue by using Elite Extra. It’s a unit of Applied Data Consultants, a Wisconsin-based company that has specialized in serving the auto parts distribution area. “They’re a mini-Google, really nimble,” Millick says.
Still, people top tech, in the community as well as on the job. One year ago, Franklin launched a “High School Hero” program honoring four students per year for promoting school spirit, serving the community, helping others, and being positive role models. Winners get a High School Hero sweatshirt, $150 spending cash, and a $500 donation to charity.
“In small-town Idaho, nobody’s a stranger,” says Tegethoff. “You say hi to them just to be nice.”
And in this out-of-the-way place, Tegethoff says he feels special when the Franklin family helps a local family move into a good home.
“My joy is seeing people get that home of their dreams,” he says. “We helped change their lives by doing our job. We provided answers.”
As for Rick Lierz, his joy comes daily as well. “It’s a fun business,” he says. “Idaho is only going to grow.”