Expanding Your Warehouse Tent Manufacturer Rental Business Beyond The Local Market

After 52 years, Daniel Hooks expanded the family business. Given Party Reflections Inc.’s already dominant share of the tent rental market in Charlotte, N.C., and an economy still in the doldrums, the president’s move could be viewed as surprising.

�To increase revenue, we had to do one of two things: buy our competition or expand our territory,� says Douglas Crowe, director of sales. After considerable market research on major cities throughout the country, Party Reflections bought the assets of The warehouse tent Rental Co. in Raleigh/Durham, N.C. �We found that Raleigh had the best opportunity for growth, where the business wasn’t built on seasonality and the market was able to bear another rental company coming in,� Crowe says. Party Reflections kept Tent Rental employees, but brought event services to its new showroom and warehouse tent and announced the opening of the new location on April 23.

PRO EM of Phoenix, Ariz., similarly researched expansion locations, including Los Angeles, Las Vegas and Salt Lake City. �We determined that Colorado was the best fit,� says Richard Martin, vice president of sales. �The season fit perfectly.� Where PRO EM’s Arizona business runs mid-September to mid-May, Colorado’s tent-event season runs mid-May through mid-September. The company purchased two operations in April 2007: Distinctive Tent Rentals in Denver and Party Concepts in Tucson.

�Tucson was to expand the Arizona base. Denver was to be an off-season shoot to the Arizona winter business,� Martin explains. �If you have a base in Colorado, you can double up the uses you get from your equipment.�

�If you want to grow your business, one of the quickest ways to do it is by acquisition,� says Scott McShan, vice president and general manager of Shaffer Sports & Events/Aztec Events & Tents. Headquartered in Houston, Texas, Aztec acquired Shaffer (in business since 1913 in Coshocton, Ohio) in 2003 and in 2007 bought three more tent rental companies�”two in San Antonio and one in Birmingham, Ala., with a warehouse tent in Houston. On the heels of expanding its market with Shaffer’s established business in national sporting events (particularly golf), the company added Aztec’s party rental services to the Alabama location. �The first year, [the party rental business] wouldn’t have been able to stand on its own,� McShan says. �But added to the golf business, it was easy.�

Road trip

Tent rental companies need not operate from multiple locations, however, to expand business geographically. From one location in Memphis, Tenn., Mahaffey Fabric Structures serves all of North America, as well as the Caribbean.

�Our inventory is the reason we get work outside the area, because many local companies cannot satisfy the needs of the local customer,� says George Smith, Mahaffey’s vice president. �Sometimes we work independently and sometimes with local companies. We would rather come in and do the big tent and the local company can do the ancillary products that are too expensive to ship [economically].�

Like other tent rental companies, Mahaffey maintains its own fleet of trucks, but also outsources transportation. �We always take at least one truck. Then the second, third, fourth, fifth are usually private carrier,� says Smith, noting that if workers don’t need to stay the length of the event, he’d rather have only one deadheading truck.

John Creedon, president of Creedon and Co. in Worcester, Mass., had just scheduled a July meeting with his accountant and a mergers and acquisitions specialist when he said, �When I started [25 years ago], my tent season started in June. It now starts in March, and I am trying to get it so that income is more level through the year.� Meanwhile, Creedon has expanded operations with more trucks (a fleet of 12) and more travel�”typically to Florida, Las Vegas and throughout the mid-Atlantic region�”to capitalize on seasonal business.

�The opportunities that happen for me are through other tent companies,� Creedon says. �I am involved in a couple of tent organizations, and I think what’s made me successful so far is relationships. If I go to a job from their company, they know that I am not going to steal their customers. We try to be an honorable business.�

Butch Ruggiero, president of Special Events Tent and Party Rentals in Bangor, Pa., says his company will travel up to 300 miles. �The jobs we travel for have to warrant the distance,� he says, noting that a third of Special Events’ business is more than 50 miles from its warehouse tent manufacturer. �We try to be subcontractors for other companies. We try to make relationships with rental companies in other areas when they have a job they cannot fill.�

Do the math

While working outside the neighborhood increases the number of opportunities a company can seize, other considerations need to be taken into account in determining whether the revenue is worth the expense�”or how to make it worth the expense.

While working outside the neighborhood increases the number of opportunities a company can seize, other considerations need to be taken into account in determining whether the revenue is worth the expense�”or how to make it worth the expense.

In addition to the price of gas, there are lodging and per diem costs for work crews. �If you need 10 people for setup and the rest of the time four [people], for one day we will hire in six laborers,� Martin says. �I have a little sheet where I plug in all the numbers. I can do it this way and get this or do it this way and get this. I just play with the numbers until it works.�

Crowe’s �loose formula� for determining how many staffers to send on a remote job is the nature of the project relative to its distance. �If it’s an extremely complex job, this is something where we need to have our team out there,� he says. �It’s where the threshold is for affordability to the client. We are proactive in communicating to the client what the expectation is if you get us and what the challenge is if you don’t.�

While multiple locations curtail transportation costs, they raise overhead costs. �Let’s say you are a $5 million company. To grow to $6 million, your profitability is actually reduced, because the investment outweighs return. You really need a bigger step to $8 million in revenue to get the right return on investment,� Martin says. �You have to ramp up. You have to have people and inventory to take it to the next level. It takes two to three years. You have to spend money upfront. To go bigger, you have to sacrifice first.�

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