Hassell h. franklin; franklin corporation
AMERICAN HOME FURNISHINGS HALL OF FAME
ORAL HISTORY INTERVIEW
March 13, 2014
FRANKLIN FURNITURE CORPORATION OFFICE
Tony Bengel, Interviewer
INTERVIEWER: This is Tony Bengel. It's March 13, 2014 and I’m interviewing Hassell Franklin, founder, chairman and CEO of Franklin Furniture Corporation in his office in Houston, Mississippi. Mr. Franklin, let's begin at the beginning. When and where were you born?
FRANKLIN: I was born May 14, 1935, in Lee County Mississippi which is next to Chickasaw County where we are now. Tupelo is the county seat of Lee County and really the center of northeast Mississippi. I was born in rural Lee County, five or six miles from Tupelo. My dad was a farmer.
INTERVIEWER: Do you remember anything about the Great Depression? It must’ve been a hard life on a farm in those days.
FRANKLIN: Yes, it was, really tough. I don't remember much about the Depression myself but I heard a lot about it from my folks. We lived on a small farm. Later small farms became pretty much extinct. It was hard to make a living on a small farm.
INTERVIEWER: What kind of farming did your family do?
FRANKLIN: We raised cotton and corn, had some cattle, milk cows, pigs. The normal type of small farm in this area.
INTERVIEWER: How big was your farm?
FRANKLIN: Probably around 125 acres.
INTERVIEWER: I imagine you pitched in at a very early age.
FRANKLIN: Yes. I worked in the fields. My dad was a great watermelon grower. People in the area would always look forward to getting watermelons from him. The first thing that really stands out in my memory happened when I was 12 or 13. We had been taking our watermelons into Tupelo and selling them on the weekends. But I said, “Why don’t I sell them every day on the side of the road?” So I built a roadside stand with a little top on it and we did quite a lot of business. At that time a lot of women on the farms were picked up by buses and taken into Tupelo to work in the shirt and clothing factories, cutting and sewing. Those buses would come by, stop and buy watermelons. Those women were great customers.
That experience gave me the notion that I really wanted to be a business person later in life. My dad would mark the prices on the watermelons but sometimes I would change them, mark them up and get more for the watermelons I thought were bigger and better. He said, OK, that’s fine. So I was really excited about business. I knew I wanted to be a successful business owner although at that time I didn't know what business of course. So I grew up working hard, cutting and storing hay and doing all the normal things you do on a farm but I knew I wanted to be a successful business owner when I grew up. That really was the beginning of my business career.
INTERVIEWER: Did you have brothers and sisters?
FRANKLIN: Yes. There were seven of us. I had five sisters and one brother. I was the youngest.
INTERVIEWER: Were you allowed to keep some of the money you made selling watermelons?
FRANKLIN: Cash money was kind of short in those days but I remember I kept some. In the fall my folks would buy us school clothes after we started getting the crops in and selling them. Sometimes the crops weren’t so good. I remember on occasion I would use some of my money to buy school clothes for my sisters and for myself. That gave me a good feeling.
INTERVIEWER: Obviously, none of your family were in furniture.
INTERVIEWER: Was any furniture being made in the Tupelo area in those days?
FRANKLIN: No. All the industry we had were the shirt factories I mentioned. The furniture industry didn't get started until around 1950, ’51. That's when Morrie Futorian came to northeast Mississippi from Chicago and started making upholstered furniture. A lot of folks that went to work in the furniture factories had never had an industrial job before. But they had a great work ethic which certainly was a big part of his success.
INTERVIEWER: What ultimately happened to the family farm?
FRANKLIN: In the early ’50s, it became really difficult for a small farmer to make a living. So my dad got a job with the maintenance department in the City of Tupelo. I think we moved to Tupelo when I was in the 10th grade.
INTERVIEWER: Tell us about your schooling.
FRANKLIN: I started school in a rural schoolhouse. I don't remember very much about it. The thing that stands out in my mind is that one day the teacher made me eat spinach and I hated spinach. She came by and said, “Hassell, you eat all your food. We don’t leave food on our plate. There are hungry people in the world. ” I did eat it, but I think that stands out because I believe you shouldn’t make someone do something against their will. That was the lesson I learned and I hate spinach to this day.
INTERVIEWER: Wasn't it the Depression mentality that if you were lucky enough to have something to eat, you had to finish it?
INTERVIEWER: Were you a good student? Did you enjoy school?
FRANKLIN: Yes, I enjoyed school but I was never a top student. I was a B and C student all the way through high school. I never really focused on studying until I entered Mississippi State, where I made the Dean’s List. History was always fascinating to me and I made good grades in history. I like to read about successful people.
Elvis Presley sat behind me in school when we were in the sixth grade. Elvis would bring his guitar to school, sit on the steps during recess and play his guitar while most of us played football, baseball, whatever was in season. One day while he was playing I just grabbed his guitar pick and threw it away. I wasn’t a mean person and I don't remember having any reason to do something like that. I guess it's just what sixth grade kids do sometimes.
When the bell rang and we went back to the classroom, Elvis was kind of sniffling and the teacher went to check it out. I thought the teacher liked me and that I was kind of the teacher’s pet. She said, “Hassell Franklin, come to the front of the room. I want you to apologize to Elvis. And let me tell you something.” She grabbed my hand and grabbed my little finger. “If you ever, ever make Elvis cry again, I’m going to put your little finger in that pencil sharpener, you understand?” “Yes, ma’am.” “Now you go back and apologize to Elvis.” I went back and put my arm around him and told him I was sorry. He started laughing. That was it.
INTERVIEWER: Was Elvis in later classes with you?
FRANKLIN: No. At the end of sixth grade his family moved to Memphis. In the sixth grade we did everything in one room with one teacher. So every school day that year Elvis sat right behind me.
INTERVIEWER: You graduated from high school in what year?
INTERVIEWER: You had decided to go to college?
INTERVIEWER: Did anyone else in your family have a college education?
FRANKLIN: No, I was the only one.
When we moved to Tupelo I got a job that summer working at a local gas station that had a wrecker service and I continued to work there on weekends. I played basketball and baseball and sometimes that would interfere with work. But from the time we moved from the farm to Tupelo I worked at this service station in the summers and on weekends. I got to drive the wrecker and do all kinds of things as a teenager at the gas station.
INTERVIEWER: Were you good in sports?
FRANKLIN: I was OK but not outstanding. I played on the basketball team from the ninth through the 12th grade, played baseball a couple years and football a couple years.
INTERVIEWER: Did any coaches influence you significantly?
FRANKLIN: They were great coaches and great people but I don’t remember anything significant that I took from them.
INTERVIEWER: Why did you decide to go to Mississippi State?
FRANKLIN: I didn't go there immediately after I graduated from high school. I worked at the service station that summer. My folks weren't able to pay for a college education but we had a local community college, Itawamba Community College in nearby Fulton and I went there for a year and a half. I also got a job at a toy plant that had just moved to Tupelo. They made rocking horses and those kinds of things. I worked in the mill behind the planer stacking lumber. I went to school during the day and worked at the toy plant from four o'clock in the afternoon till midnight.
I had joined the National Guard to get extra money while I was in high school. Three or four of my friends had joined and also were going to the community college. We heard the GI Bill was going to be discontinued in January of ’55. We decided we could go into the Army and qualify for the GI Bill to fund our education. We went through all the testing procedures and so forth, including the usual bureaucratic delays and got in the Army three days before January 31. I spent two years with the Army's First Armored Division where I was made a squad leader. When I was discharged from the Army I went back to community college for another semester then transferred to Mississippi State.
After I graduated from Mississippi State I went back into the Army for three months, attended officer school and became an officer, then re-enlisted in the National Guard. I was made company commander of Guard Troop G in a town nearby called Pontotoc. I was commander of that guard unit in 1962 when James Meredith became the first black student to enroll at Ole Miss in Oxford. Violent protests ensued. We were mobilized and sent to Oxford. We were the second Guard unit on the campus that first night. My orders were to report to the regular Army general who was in charge there for our instructions.
That was a terrible night. Our vehicles got shot going from Pontotoc to Oxford. The road was lined with rednecks and federal marshals, who were getting beat up. Tear gas was everywhere. I had to put my gas mask on. I was riding in the unit's front Jeep. At one point a guy with a beard jumped into my Jeep. I saw him coming toward me out of the corner of my eye. He had some kind of metal thing in his hand. He cut my chin open to the bone although I didn't immediately realize how badly I'd been cut. I managed to get my unit to one of the buildings on the campus which was in an uproar, with gunshots all around.
I suddenly notice my gas mask and mouth are filling up with blood and I was feeling cold. I had a first sergeant who had served in Korea as a master sergeant. I said to him, “Sergeant, I’ve been shot.” I pull up my field jacket and he feels around my back and stomach. He says, “No, I can’t feel any place you have been shot.” Then I took off my gas mask and – boom! – blood goes everywhere. I could feel my chin bone. It sounds almost comical now, but then my adrenaline was flowing and I was really keyed up. We managed to stop the bleeding. I reported inside one of the buildings to a Mr. Katzenbach from the U.S. Justice Department. I told him who I was, how many men we had. He said, “I want you to go take the chemistry building. They’ve broken into the building and they’re throwing chemicals on the marshals.” But that's another story and I won't go into that now.
Later that night at just about daylight one of the doctors who worked in the Ole Miss student infirmary comes up to me out in the open and says, “Captain, we've got to sew your chin up.” I said, “You’re going to do that out here? He said, “Yes, we’re going to do it out here. I’ve got all the stuff I need with me.” He was smoking a cigarette and had long ashes dangling from the tip. I said, “Well, don’t drop those ashes on my chin as you sew it up.” He sewed it up on the spot and the scar is pretty much gone now.
Our unit ended up staying at Ole Miss for three weeks, camping near the football field. Every time Meredith went to class we fixed bayonets and stood in ranks in case of trouble on the campus. That stint ended my military career. Soon after that I got out of the Guard.
INTERVIEWER: Tell us about your time at Mississippi State.
FRANKLIN: I majored in industrial management which at the time included courses on manufacturing, engineering, time-motion studies, etc.
In the late '50s companies like Rockwell, Pennsylvania Tire Company and others were moving into northeast Mississippi. I didn't know much about these companies but I could see the area was becoming industrialized. The small farmers were leaving the farms, and they made a great workforce. Tupelo had a good recruiting effort through its Community Development Foundation which was attracting industries to the Tupelo area. So I thought industrial management could lead to a nice career. I had the GI bill to help pay tuition and I also delivered newspapers, roofed some houses, did anything to make extra money. That's how I got through school. As I mentioned I made the Dean’s List.
INTERVIEWER: Did you have any outstanding professors that influenced you?
FRANKLIN: Yes. There was a professor named Dr. Darr who had worked for Ford Motor Company. He wore white shoes and had a big gold watch chain. We kind of laughed about that but he was a smart guy and he’d been out in the industrial world. A lot of professors hadn’t. He made an impression on me. He had been there and done that. He told some interesting stories about Henry Ford and Ford Motor Co.
INTERVIEWER: Did you take accounting and marketing courses?
FRANKLIN: Yes. Nine hours of accounting, about twelve hours of sales and marketing along with business law and engineering courses. It was a well-rounded curriculum.
INTERVIEWER: Did you work at any of the industrial plants during the summer?
FRANKLIN: No. I went straight through including both summer semesters. I didn’t stop until I got my B.S. degree.
INTERVIEWER: Did you like accounting?
FRANKLIN: Not really, it was ok.
INTERVIEWER: You’re not a numbers guy?
FRANKLIN: Well, yes, I am now, because you need to watch the bottom line, your costs and those kinds of things. But I always wanted to interact with people, get involved with people. I didn’t want to sit behind a desk. I didn’t want to be an accountant.
I was always motivated by working with people, getting people to work together. That happened to me in the military when I was made a squad leader at a very young age and worked with people 10, 15 years older than I was. It also happened when I first went into the business world. One of my first bosses told the owner that I was too aggressive; he was 30 years older than I was. The owner came to me and said, “Hey, I love what you’re doing. Don’t listen to that guy.”
So from my Army days I've learned how to motivate people, to take ownership of the task at hand and to accomplish our goal. When you do that everybody can say, “Wow look what we did.” Not what you did or what I did but what we did as a team. That’s really played into the success of our company. It’s people taking ownership.
A big part of it is coaching and team building, letting everyone feel a part of what we’re doing and be involved in setting the goals. Then take ownership. Maybe I learned some of that in college at Mississippi State but a lot of it I learned in the military. I liked the military except I didn’t like the time it took to get promotions.
INTERVIEWER: You came to believe that a leader needs to create a buy-in culture. That seems a bit out of sync with the military, which essentially is a command culture, is it not?
FRANKLIN: When you are in the foxhole and bullets flying overhead I believe it would truly be a buy-in culture. When I think back I was pretty much a loner early on, because on a farm the nearest person to you might be some distance away. I think I learned teamwork as part of a large family, as the youngest child looking at my older sisters and brothers. I learned a lot from them as well as my parents. I learned you've got to be together, we've got to do this together. All kids and families fuss and argue sometimes but I never liked that. The key to success is getting people to work together. That's been true in our company. As Jim Collins, the author of “From Good to Great,” says, get the right people on the bus, get the right driver and you’ll accomplish your mission. With the wrong people you'll never make it. You get the wrong people, you can work 24/7 and never make it. But the right people with the right culture working together is the key to success.
Jack Welch, the former CEO of GE, is one of my business heroes. I've read every book he’s written. He famously said that you can’t change until you change the way you think and to change the way you think is to change the culture. You can’t buy that culture, you have to make that culture. You do that by getting people to accept ownership and become a part of the culture. You don’t do that with a whip, saying you've got to do this, you've got to do that. You don’t do it with employee handbooks that have 50 pages of rules. I think rules are made to be broken when it makes sense to break them.
The furniture industry’s changed probably as much as any industry in recent years. Everything we do has changed. A company can't deal with that without a buy-in culture. I've read about and studied organizations that didn’t make it and those that did. If everybody is in it together they can make the changes needed to survive.
I think back to my first job in the furniture industry after I graduated from Mississippi State. It was with a small spinoff of Futorian. A production guy and a sales guy left Futorian and started a company called Siesta. They tried to copy what Morrie Futorian was doing but their company was really a mess. I went to work for the company as an industrial engineer. They had three or four small factories in vacated school houses and it was organized confusion. They went bankrupt after a couple of years after I started working for them. I look back and I think I got a Ph.D. in how not to do things. That’s important too.
INTERVIEWER: Did you have any bad experiences in the military that you learned from?
FRANKLIN: You know I don’t have any bad memories of the military. I had sergeants and other career people I didn't particularly care for but in my view the military was the greatest organizational structure there was.
INTERVIEWER: How do you mean?
FRANKLIN: I mean that they knew how to organize a company, a unit. They had field manuals that told you in great detail how to do this, do that. The chain of command meant the military had it down pat and I liked organization. I liked to be at the right place at the right time. Of course it’s not that big a deal but it is for me because you set an example. Someone’s looking at you. Many of my leadership qualities were developed in the military.
INTERVIEWER: Did your mother and father encourage you to go to college? Was it understood that you needed to go to college in order to succeed in a changing world?
FRANKLIN: My mother and father were raised on farms in Tennessee and they weren't high school graduates. They were great people and very smart but they didn't have a formal education. They wanted me to be successful of course but what you did back then was finish high school, then you got a job. I said from early on that I wanted to be something better but I didn’t have any idea what kind of business I would pursue. The military was great for me because it got me focused. Before I went into the military I didn’t study like I should have. My folks knew that I wanted to go to college but they didn’t have the financial wherewithal to send me. When I got out of the military and went to Mississippi State, got married and we had our first son, I really studied hard.
INTERVIEWER: What did you learn about leadership at Mississippi State?
FRANKLIN: One of the best courses I remember wasn't even a business course. It was a speech course. Charlie Wilson, once the CEO of General Motors and then defense secretary under Eisenhower, had recently said that what was good for General Motors was good for the country. Our speech teacher said he wanted a person to make a speech defending that statement and another to oppose it. I volunteered to take the GM side. I did a lot of work on that speech and pretty much made the other guy look uninformed. The teacher gave me an A. Doing that gave me a lot of confidence. I thought, “Hey, I’m pretty good.” I was really proud of myself.
INTERVIEWER: Tell us more about the first furniture job you had after you graduated from Mississippi State. How did you find the job?
FRANKLIN: One of the guys that started the plant lived across the street from my folks in Tupelo. As I've said, Siesta was a spinoff of the original Morrie Futorian plant in Mississippi.
INTERVIEWER: Morrie is considered the patron saint of furniture-making in Mississippi.
FRANKLIN: Yes. They usually put me on the “Futorian family tree” in defining the growth of the industry in NE Mississippi but I never worked for Futorian. Bo Bland and I lived next door to each other in Tupelo, and Bo worked for Futorian before he and Mickey Holliman, who also worked for Futorian, started Action. While he was at Futorian Bo once offered to hire me. He offered to double my pay but I had heard some horror stories about Futorian, that Morrie would come down from Chicago, walk out in the plant and start firing people. I didn’t like that so I never worked for Futorian.
INTERVIEWER: Who were the folks at Siesta who hired you?
FRANKLIN: Van Riley was the sales and marketing guy and Boyce Moody was the plant manager and superintendent.
INTERVIEWER: Did you learn anything from them or was it essentially a bad example, as you've mentioned?
FRANKLIN: Here’s what happened. About two weeks before I went to work for Siesta they had bought an airplane, even though they really didn’t know how to fly, if you can believe that. Boyce Moody tried to fly it in a storm and killed himself and two other guys. So Boyce had passed away just before I actually joined the company. He was a great manufacturing guy. Morrie Futorian was high on him and tried to keep him from going into business with Van Riley. When I came on board there obviously was a big void in manufacturing. No controls, no systems, no processes. I was soon ready to say, “Wow, this is not what I envisioned.”
In addition to the airplane, Van Riley and Boyce Moody had fancy automobiles. They lived high on the hog as we say in Mississippi. They acted a lot like absentee owners. I learned early that you weren’t going to be successful in the furniture business unless you could build an organization, position it right and have the right leadership. Van Riley later committed suicide by the way. So it was a sad situation but I learned some valuable lessons at Siesta.
I could see that Siesta was heading for bankruptcy. I had talked to W.R. Jackson, the owner of The Jackson Companies, Pullman Couch and Cleveland Chair Company. He told me he was thinking about buying Siesta and suggested that I stick around and not leave the company. Siesta had taken out loans from The Walter E. Heller Company, a factoring company based in Chicago. One Sunday night I get a call from a guy who said, “I’m here from Walter Heller. We’re taking over Siesta tomorrow morning. I’ve been told you’re the only one we can trust in the company so I’d like to have you work with me. I will reward you handsomely if we can close this out and get what money we can out of Siesta by manufacturing and shipping additional finished goods with already purchased raw materials on hand.”
So for six weeks I did a weekly pro forma financial statement saying what we would need to spend, how much finished goods we could ship and the bottom line profit from total revenue shipped. The raw materials basically were already there and we had orders from Montgomery Ward. In those six weeks we were able to create probably well over a million dollars out of the inventory of covers and frames we had on hand, although we had to buy a few things. Walter Heller with my help was able to recover a large amount of money. That was some kind of experience for me.
Meanwhile W.R. Jackson was negotiating with Heller to buy the assets of Siesta, which they ultimately did. They renamed it Shannon Chair and Jackson later moved production to a plant they had here in Houston. I commuted from Tupelo to Houston for two years. After I crashed with a deer on the Natchez Trace I said, “That’s enough, I’m moving to Houston.”
INTERVIEWER: So you indirectly joined The Jackson Companies. What job title did you have?
FRANKLIN: I was the plant manager of their Houston plant, the Shannon Chair Company. They had built the plant in the early '50s. They had other plants in Cleveland, Tennessee, in Amory, Mississippi and maybe another plant somewhere else. W.R. Jackson has passed away now. I guess he was well into his 60s then.
The Houston plant made promotional living room furniture. After about a year in Houston I was made vice president of sales and manufacturing so I started selling. We needed business and we basically had no salesmen.
INTERVIEWER: Tell us about your sales activities.
FRANKLIN: One of the first accounts I called on was Montgomery Ward. We already were doing business with them, as I've mentioned, much of my initial work involved administrative issues — making sure we processed their orders properly and shipped them on time. I started visiting their Chicago headquarters and that led into product development and marketing. So I was both plant manager and salesman, which isn't typical but that's the way it happened.
We also were doing business with companies like Western Auto and Otasco, which had franchise dealers across the country. They’d have dealer shows in various cities, where they showed their upcoming product lines. I started attending those shows on the weekends. For several years, I’d work at the plant until Friday and then I’d go to those shows on Saturdays and Sundays. We were able to grow the Shannon Chair business from a million dollars or so to over $15 million in about four years.
INTERVIEWER: How were you able to do two jobs at once?
FRANKLIN: By pretty much working 24/7. When I started our company in 1970 I did much the same thing, running the plant and also out hustling, trying to get business, going to accounts, going to shows. I worked the first six months basically seven days a week.
INTERVIEWER: You didn’t have much of a family life.
FRANKLIN: I obviously didn’t, no. As I look back I wish I had spent more time with the family, particularly with my two boys. But they are in the business with us today. One was made president about four years ago and the other is senior vice president and they are spending much more time with their families than I did, and that’s a good thing.
INTERVIEWER: So you saw no real future there?
I'll never forget the time I told my two sons that I had decided to leave Jackson and start my own company. We were on a small airplane in windy weather coming back from Atlanta. I had taken them with me to one of those weekend dealer shows held by one of our major customers for their franchise stores. We were coming back that Sunday. They were, what, nine and eleven years old? I told them I was going to resign from my current job and start my own company. I said, “You probably aren’t going to get any new shoes for a year or two. Money is likely to be very tight for awhile.” I really gave them a spiel about how we needed to be frugal. They still remember that flight on a little Southern Airways twin-engine plane that was blowing all over the place.
Six months before I went into business I went to the bank and said, “Here’s what I want to do.” Of course at that time I didn’t even know what styles we were going to make, and who would buy them. But I put together a five-year business plan with pro forma income and expense statements, telling them how much money I was going to make. I laid it out by the book. This allowed me to open a business account with a sizable credit line. I went in business in February of 1970, started production in March and at the end of nine months I had exceeded the five-year plan both in sales and profits.
Our company’s only borrowed money one time in order to expand and that was a bond issue to build our mechanism plant. We’ve grown by using our excess cash flow. We’ve had a total of 13 major expansions. We have 1.1 million square feet on our 75-acre campus here now. As the business opportunity was there and as our cash flow grew, we’ve expanded our facilities. The only debt we’ve ever had is the bond issue when we built our mechanism plant.
We’re a vertically integrated operation. We’ve got five major components to our manufacturing process - a dimension mill where we cut all of our frame stock, a foam fabricating plant, a cutting and sewing facility, a reclining chair plant and a motion sofa factory along with a logistics company. We’re probably more vertical than any other motion upholstery operation.
INTERVIEWER: Did anything other than your desire to be an owner motivate you to start your own company?
FRANKLIN: It goes back to selling watermelons on the side of the road. I always wanted to own a business. I didn’t know what it was going to be, but I had always said that I’m going to own a business. It just happened to be in furniture.
INTERVIEWER: What opportunity did you see in recliners, and later on motion upholstery? Why did you believe you could successfully compete in that arena?
FRANKLIN: Well, after Morrie Futorian started making upholstery here in the early '50s, furniture became the buzz. It was the talk. People thought the furniture business was really great. Little companies were popping up, like Siesta. There was little startup money involved. The people who were merchandising and marketing the product were making the money and they lived in Chicago, New York or the west coast. The people here were just getting a little markup on their labor. So I’m saying to myself, furniture is really about marketing. We can market it, not just make it, and we can enjoy the profits. Not some sales agency in New York or Chicago or wherever.
Growing up here and the only industry I'd seen back then was shirt factories, low-paying, minimum-wage operations. The wife worked in the factories and the husband farmed. After I got out of college I saw the furniture industry as a great opportunity for an entrepreneur.
Northeast Mississippi in fact did become the largest upholstery producer in the country at one time before globalization kicked in. I believe the number of people employed in furniture was about 34,000 in an 18-county area in northeast Mississippi in the early '90s. That was big. We also had five or six foam pouring plants here and Leggett & Platt had a mechanism operation here. We had everything here except the fabrics.
INTERVIEWER: What did you see as your niche when you started Franklin? What niche would you serve that wasn’t being served?
FRANKLIN: All the Mississippi upholstery makers were low-cost producers, and that's what Franklin would be too. The only real difference for us would be that I knew we had to build trust with our customers and we had to figure out in each case how we could do something for them that no one else could or would do – how could we differentiate ourselves from our competition.
I was self-taught in a lot of this because I didn’t have a mentor in sales. Maybe a better way to say that is, I was taught by my customers, by the merchandise managers and retail buyers I worked with when I was with Shannon. I always tried to establish a relationship with them so that I would earn their trust. I think I was successful at that. I once visited Montgomery Ward, spent a whole day with them, then wrote orders for over $2 million and the buyer signed the orders without question. I never believed I could do that but that’s how much they trusted me.
You build that kind of trust and loyalty face-to-face, one customer at a time. I learned that from my own experience. Nobody had heard of Shannon Chair. They knew about La-Z-Boy, Berkline, Futorian, but not Shannon. You had to sit down with potential customers and carve out something you could do for them that was better than someone else could do. You had to figure out a way that you could be better than your competitor.
What we really did was do something for the customer that our competition couldn’t do. What does that mean? It depends on the customer. Maybe it's shipping quicker. Maybe it's hitting a better price point, a particular price point. But you've got to do something to beat the competition.
Also, we built our company on integrity. We always did what we said we would do. We made the commitments and we lived up to them. You can run double-truck ads in every issue of Furniture/Today, but if you don’t do what you say you’re going to do, if you don’t have integrity and don’t build trust, if your organization doesn't accept ownership and buy into what you’re doing, if you don’t have that culture you’re not going to be successful. You're going to wake up at some point and say, “Duh, what happened?” I see that on both the retail and manufacturing side of the business today, as the economy still is not totally out of the woods.
But back to starting the business. I knew that I could put together an organization that was exciting, and that’s what made it so exciting for me. I was going to do this. I was going to make this happen. Not from the ego standpoint but from the standpoint of, “Look, this is my dream, this is what I’ve always wanted to do.” That’s what motivated me. I never even thought about not being successful. I knew I was going to make it happen. The main thing was establishing a relationship with a customer base and I had been able to do that. I didn’t have any business yet but I knew I had a lot of friends in the industry and those friends paid off. I got the first order and a check was attached. Pretty strong, heady stuff for a start-up company to get paid before shipment of the order.
INTERVIEWER: Do you remember who gave you that first order?
FRANKLIN: They’re not in business anymore -- after over 108 years. It was a company called Belknap in Louisville, Kentucky.
INTERVIEWER: Who were the first people that joined you when you launched Franklin?
FRANKLIN: A person that I had picked out at Shannon. He wasn’t the superintendent. He was in charge of quality but he was also a good manufacturing guy. Also, the next was the purchasing agent.
INTERVIEWER: The three of you talked among yourselves?
FRANKLIN: We had talked for quite some time. After the new company was announced, several other people wanted to come to work with us, several key people, including the superintendent. But I told them, “This is a new company and we just can’t afford you now.” Then the payroll clerk became my administrative assistant, then the lady who did the cover and frame reports came aboard. I started in a little warehouse about half a mile down the railroad from the Shannon plant. We started out in about a 12,000-square-foot building – it was actually a tin warehouse.
INTERVIEWER: How did you find the first facility?
FRANKLIN: It was only a half-mile from the Shannon plant. It might’ve been an old shirt factory at one time. It was vacant and owned by a local doctor. He told me there was no rent due until he told me and he never told me. Then I got a Small Business Administration loan and we built our first 60,000-square-foot building in late 1970. The two local banks put up $50,000 apiece and the loan was guaranteed by the SBA. We paid that back in about three years. We began construction in August and moved in November. So our growth was real fast. As I said, we’ve had 13 major expansions totaling 1.1 million square feet, including a metal stamping plant, a foam cutting plant, a dimension mill, a computerized cut-and-sew operation, a complete product development and research department, and a logistics company, all on 75 acres.
INTERVIEWER: What was your first product?
FRANKLIN: It was a recliner. We made mostly reclining chairs for the first 20 years we were in business. Last year I calculated we've made over 12 million reclining chairs, enough for every person in Mississippi to have four recliners each. In 1991 we started manufacturing motion sofas, loveseats and sectionals. Later we started making medical lift chairs which is now a major component of our business. So we now have four product lines — stationary upholstery, motion upholstery, reclining chairs and lift chairs.
INTERVIEWER: You said your first order came from a Kentucky retailer. Who was your first major customer?
FRANKLIN: It was a company called William Volker. It was a division of Mohasco. William Volker was a distributorship west of the Mississippi River founded by a guy with that name who later became a philanthropist. He lived in Kansas City, had 32 distribution centers from the west coast to the Mississippi river. The company was some ninety years old and was a distributor of carpet, furniture and related items.
INTERVIEWER: When you started making recliners, I assume you were working on the Futorian model of assembly-line production, correct?
FRANKLIN: Yes. You try to do it better, but you don’t reinvent the wheel. You do what works. Even today, I like to steal good ideas and make them better.
INTERVIEWER: That’s pretty much what the furniture industry does.
FRANKLIN: That’s what it’s about now and that’s what we did then.
But let me get back to starting the business. After I got the profit-sharing deal instead of the ownership stake at Shannon, I knew I would be starting my own company in a year or two. And that's pretty much what happened. I resigned in early 1970 and quickly launched Franklin.
Shortly before that, in November of 1969, Bo Bland who was VP of manufacturing at Futorian and later started Action Industries with Mickey Holliman called one day and wanted to come see me. Bo comes into my office, makes sure the door’s closed and says he wants to share a very confidential scenario with me. He said, “I’m leaving Futorian and starting a new recliner company, and Mickey Holliman is coming with me. We’ve been planning this for a couple years. I want to know if you’ll buy mechanisms for us. We have to buy mechanisms from SuperSagless. Since SuperSagless is owned by Mohasco, which also owns Futorian, we’ll probably get cut out and we’ll have a big problem. So I was just wondering if you’d be willing at Shannon to buy mechanisms and then let us buy them from you for six months, until we see how things are going to go.”
Here I am listening to Bo and I've already put my own plan in motion. I've already been to the bank and established a $100,000 credit line. What am I going to tell my friend? I hadn’t gotten my profit-sharing payment yet, and if the word got out I might never get it.
I said, “You trusted me with a big, confidential decision. Can I trust you?” He looked at me and said, “What are you talking about?” I said, “I’m going into business too. I’m starting my own company.” So that changed the conversation.
I asked Bo what he was going to call his company. I told him mine was going to be The Franklin Corporation. Bo said he and Mickey hadn’t decided yet although it wouldn't be a double name. He noticed a display board I had in my office. The board had several pictures of recliners and underneath them I had written the words, “Action Chairs.” As I've said Shannon did big business with Montgomery Ward. The buyer we worked with there had started calling them action chairs instead of recliners so that's why I put those words on the board. Bo looks at the board and asks where the words “Action Chairs” came from. So I tell him about the buyer at Montgomery Ward. I never asked him and he never told me and I don't know what Mickey would say but I believe that's how they came up with the name of their company, Action Industries.
Bo and I were good friends and remained great friends until his death. As you know he and Mickey are both in the Furniture Hall of Fame. Bo and I had lunch together, which later became an extended conversation about six weeks before he passed away.
About a week or so after we'd met in my office, Bo calls again and wants to talk. “About what?” I ask. He said, “You know, I’m in manufacturing and Mickey’s in manufacturing. You’re in sales and marketing, and we don’t have a sales and marketing person coming with us, so why don’t we talk?” So we talked for a few days. One night we met over at Okolona. I brought some P&L statements from Shannon. I showed them some of the statements which showed what kind of profits we were making and they couldn’t believe it. They said, “Are these audited?” I said, “What do you mean, are they audited? This is the real stuff.” The margins were something they’d never seen before because we had very little overhead. I was doing all the selling and manufacturing and we didn’t have any vice presidents.
They wanted me to consider going into business with them. Well, their model was different from mine. I had relationships with all these distributors and a major account in Montgomery Ward. They didn’t have any sales relationships like that. They were going to have stockholders, outside investors. I didn't want stockholders. I wanted to be in control. I wanted to do what I wanted to do. So we decided it wasn’t a good fit. We shook hands and parted company. I went in business in March and they went in business in July of 1970. Action was very successful. They sold the company a couple years later to Lane.
INTERVIEWER: Did you every seriously consider selling Franklin?
FRANKLIN: Not really. We’ve had opportunities just about every year to sell our company, until the last recession hit.
So anyway, Mickey and Bo and I almost went into business together. Bo was the first Mississippian to be elected to the Furniture Hall of Fame. Morrie Futorian is also in the Hall but he's from Chicago. Then Mickey was elected and then I was third. We’re the only three from Mississippi in the Hall of Fame. It’s ironic that back in 1970 we almost went in business together. Mickey and I were inducted into the Mississippi Business Hall of Fame together about eight or nine years ago. I told the story about almost going into business together, and Mickey said, “Man, you've got a good memory.” Bo once asked me, “What do you think would’ve happened if we’d gone in business together?” I said, “I don’t know, but I'm sure we would've been successful.”
INTERVIEWER: Do you consider yourself a control freak? Did you want to have total control of your company?
FRANKLIN: No. I never wanted to sell the business because I wanted our people to take pride in what they helped build and to say, This is our company. That's why we always had profit-sharing. Some of them make big bucks at the end of the year. No, I’m a team guy. A big-time team guy. We've got teams all through the plant. We've got hourly workers that have never been on a team before. They just thought the company ran itself. I had a lady that worked for us 22 years and was put on a team last fall. I think it was a team that dealt with customer complaints. When we get customer complaints, we log them and assign them to teams. This lady said to me, “I didn’t know the company did all this.” That makes me feel good, that they’re progressing and they’re able to reach their potential if they apply themselves.
I've been on the BancorpSouth board since I was 33. I've learned a lot from the professional people on that board and from the management and also from other boards I've served on. No, I don’t consider myself a control freak, but I like to know the game plan and be a part of the direction. There's a difference, in my view. I like to be a part of the decision-making process. I like to know why we’re doing something and what is our goal. I don’t like to say, “Here's the plan. Now, you execute it.” I want a team to help decide what we're going to do.
Our company has six goals this year and a team is in charge of each one of them, to prioritize what we do. We’ve spent some big bucks to redo our sales force automation system and a team’s going to do that. I don’t just say, do this. I want our people to know why we're doing it, why we need to do it, what drives it and then buy into what we're doing and remember the customer always comes first.
I never wanted to sell the company because we didn’t need to sell the company. We didn’t need the money. Most of the people in northeast Mississippi who sold their companies had their own reason: maybe they wanted to collect and go to the beach. I don’t want to do that. People ask me, “When are you going to retire?” I say I am retired because I’m doing exactly what I want to do.
INTERVIEWER: What about retirement? Both of your sons are in the business.
FRANKLIN: They are. We have plans. We’re a privately-held company and we don’t release what our specific plans might be. That’s why I like to be a private company. If we were a public company I probably would have been fired by now.
INTERVIEWER: Why? You’re making money, right?
FRANKLIN: I know, but I’ve done some things that maybe didn’t make sense at that time but will make sense later. If you've got stockholders beating you up every quarter for dividends I don’t think they'd stand still for investing all the profits back into the company. This is a tough economy in which to run a public company. I sit on public company boards and I know it’s a tough situation. But a private company can make decisions and do things that might not be immediately profitable. We can run our business based on what’s good for the business going forward not to pay maximum current dividends. We don’t have to answer to stockholders or to institutional investors.
INTERVIEWER: Have you ever considered an employee stock ownership plan?
FRANKLIN: Yes. Here again, we’re privately held and we think we've got our arms around the business the way it is. But things change. I've got five grandkids and two of them graduated college this past year. So who knows?
INTERVIEWER: I’ve heard people say the third generation is often the critical generation for passing on a family business. Do both of your sons seem to be completely on board and love the business like you do?
FRANKLIN: Well, they don’t have to love it like I did. One of my son’s son became an Eagle Scout at 17. I never went to a Scout meeting with my sons because I was out of town so much. They’re much more family-oriented than I was and I want them to be. I am happy they have been able to spend more time with their kids growing up. I didn’t do that and looking back this is a regret I have. They would never be driven like I’ve been driven because their backgrounds are different. We had a couple of years there when they might not have gotten a new pair of shoes, but that was when they were nine or 10. Since then, they’ve grown up well and they understand that. But I am proud they are more about family than I was.
INTERVIEWER: You are a workaholic, correct?
FRANKLIN: Yes, maybe. I like to win and I believe to win consistently you have to stay the course. I look at it as fun, as having fun, at least when you look at the complete picture.
The first year I worked basically six months without a day off. I was chief salesman, chief manufacturer, chief financial guy, chief everything and that was exciting.
INTERVIEWER: Even with the other folks that went with you?
FRANKLIN: One was superintendent of production, one was purchasing agent, one was the payroll clerk and my assistant. That was our team the first year. Our office was in the corner of the plant and we made a profit that first nine months.
INTERVIEWER: Any trouble hiring workers?
FRANKLIN: Initially we had adequate applicants and we didn’t have a place for all of them at first but we were getting more business than we thought we were going to get and we were growing at a rapid rate. We had only one production line at the outset, but we ultimately hired them all. They were great, experienced upholsterers.
INTERVIEWER: Who were some of your big accounts initially?
FRANKLIN: Montgomery Ward, William Volker and other smaller accounts.
INTERVIEWER: Do you still pretty much handle all the big accounts personally?
FRANKLIN: We have a marketing team now. My son Mark is president and my other son, Hank, is senior vice president. We also have a vp of sales and marketing, a merchandise manager and a vice president of product development. We also have two sales managers, one for the East, one for the West and twenty salesmen.
INTERVIEWER: Have you always had close relationships with your major retailers?
FRANKLIN: Yes, however I don’t personally have the close relationships I once did but I am still involved.
INTERVIEWER: Do you have a lot of smaller accounts as well?
FRANKLIN: Yes. In fact, we’ve built up those accounts over the past few years. Our business model has changed some since the recession hit. We still want a dealer to do $200,000- $300,000 in volume. We want those accounts but we do not sell everyone up and down the street. I remember when we wouldn’t sell anything but carload accounts. If you couldn’t buy a carload you weren’t our type of account, and we didn’t solicit your business. I told that one time to a guy, a good guy and a good company. He said, “What do you mean?” I said, “That’s just our niche.” We’re a volume, mass production operation and we don’t sell except in carloads. But we just don't sell to someone who's going to buy six chairs and one motion group. We have our own transportation fleet but we do not want to stop a truck eight times to deliver small orders.
INTERVIEWER: If you had tried to be a custom manufacturer with thousands of options and thousands of accounts, you probably wouldn’t have been able to survive as a U.S. producer. Am I right about that?
FRANKLIN: You’re exactly right. We would not be here today. No question. We have to stay focused on who we are. We have to stay focused on our business model and our niche. We're not a La-Z-Boy; we’re not a Lane. We’re who we are and we've got to be able to win as who we are, even as things change. For the first eight or 10 years, our largest segment of business was distributors. They’re no longer around. Of course, some of the big guys have gone under too, like Levitz, Montgomery Ward and Heilig-Meyers.
INTERVIEWER: So you started out selling mostly to distributors, and now you’re basically large accounts.
FRANKLIN: We had some pretty significant national accounts like Montgomery Ward within the first 18 months we were in business. Serving them wasn't that much different than the distributors. We’ve always focused on volume, and on selling to those with good credit. We never had the issue of whether this guy’s going to pay or this guy can’t pay and so forth, because our business model didn’t include those accounts.
INTERVIEWER: When Montgomery Ward went out of business, were you substantially harmed?
FRANKLIN: It hurt. They were a major account and we lost major dollars.
INTERVIEWER: Was the survival of the business in jeopardy?
FRANKLIN: Oh, no. But it hurt. We were well capitalized and it wasn’t a matter of life or death. Some of our competitors said that Franklin was in trouble because of the lost Wards business which wasn't true. We had never advertised much in Furniture/Today but I called the publisher Joe Carroll and he came down, met with the merchandising staff and we worked out an advertising program. We spent $150,000 to prove to the industry that we were a viable company. We weren't going to let the competition get away with saying that Franklin was in trouble and wasn't going to make it. So every issue of Furniture/Today for a year had a full-page color ad from Franklin.
We could react like that because we’ve always been a nimble company. We can make a decision this afternoon if it makes sense. There’s a big advantage to that. What’s the biggest thing today, no matter what business you're in? It's being quick. Amazon.com turns out an order in seven to eight hours. Everybody wants everything quick. About a year ago I told an account, “Who do you think we are, One Hour Martinizing?” We can’t do it in an hour. But you'd better do it as quickly as possible.
In the late '90s when I was president of the American Furniture Manufacturers Association I had the opportunity to go to Japan for 15 days. The Central Japanese Quality Control Association invited me over. I stayed in Toyota City and Nagoya for about seven or eight days, then in Tokyo. I brought back suitcase loads of notes about lean manufacturing. We had already started to go lean but this really spurred us on.
I don't think we’ll ever need any more space here even if we have good growth, because we created a lot of unused space as we got lean. We’ve got 14 computer-controlled routers that cut frames. In the past we would have three-quarters of a million dollars worth of frame stock inventory. Today we cut frames on the second shift and we upholster them the next day. We reduced that $750,000 worth of inventory to almost nothing, and we saved a lot of space too. We have accounts today we ship on the third day. Those accounts are our partners. Everyone talks about partnerships today. They are truly our partners and they give us great feedback, great information, great orders. We collaborate on designs and covers. We ship them in three days. I don’t know anybody in this industry that can ship in three days unless they already have the product sitting in a warehouse.
INTERVIEWER: So you've substantially changed your production over the years.
FRANKLIN: Big time. We’ve got conveyors within all our production lines. Our engineering department is always working to drive down costs. That’s number one. Number two, how do we ship it quicker?
INTERVIEWER: You mentioned furniture markets earlier. What do you remember about the first markets you attended? Was it when you were at Shannon?
FRANKLIN: No, before that when I was at Siesta in the '60s. The Chicago markets were the biggest furniture markets back then. They were in the American Furniture Mart at 666 Lakeshore Drive, in January and July. They were two-week markets. What many companies did was try to sell their production for the next six months. The January market always opened on New Year's Day until they finally changed the dates. I flew to Chicago many times on New Year's Eve.
I said to Siesta's owners that I’d like to go to the market and they said, “OK.” The biggest memory of my first market really has nothing to do with business.
Siesta had a supplier in Mississippi who I hardly knew but he flew a little Cessna 150. He was going to the January market in Chicago and he wanted somebody to fly with him probably because he wanted someone to be on the lookout for other aircraft. So I went with him. We literally flew by following the highway. We landed at Meigs Field which was near downtown Chicago on Lake Michigan.
We got there and the next day I was standing in line to get into the building. It was early in the morning and really cold and the line wrapped around the building. I started talking with a nice gentleman who was in front of me in line. I said something about this being my first market and he said it was the first time for him too. It wasn’t a long conversation but it turned out that he was Kemmons Wilson, the founder of Holiday Inn. I was shocked because this is not long after he started the business. There already were Holiday Inns everywhere. Here was a great, successful business person and he's standing in line on a cold morning to attend the market. I wondered why someone had not taken care of him and gotten him into the building.
INTERVIEWER: I assume only a few people had heard of Siesta. Did you sell anything at that market?
FRANKLIN: Yes. There was a sales force out of Chicago that represented Siesta and since Siesta was a spinoff from Futorian people kind of knew what sort of company Siesta was.
On the whole, that first market was not an inspiring experience. I was a bit disappointed. I'm not exactly sure why. I guess I thought it would’ve been more organized. It all seemed a little bit in disarray. There also was a lot of alcohol and things that go with that. Not good, from my standpoint.
INTERVIEWER: What do you recall about your first High Point Market?
FRANKLIN: That would have been in ’65 or ’66, when I was with Shannon.
INTERVIEWER: Was it a better experience?
FRANKLIN: Yes. I had to stay in a private home owned by an elderly lady whose son or husband — I can't remember exactly — had been president of Globe Furniture at one time. I didn’t like staying in someone's home.
The Jackson Companies were doing a lot of business. We had prior appointments and really worked by appointments. Shannon didn't show at the first High Point Market I attended but the other Jackson companies did — Cleveland Chair, Pullman Couch. Shannon did show later on and worked only by appointment with major accounts, at night or whatever time we needed to. I'm not sure what building we showed in. It was somewhere on Main Street.
But I thought High Point was probably the worst place to have a market because it was hard finding a place to live or to eat. But it was on furniture row, so to speak, and became the biggest furniture market in the world.
INTERVIEWER: I assume you showed at the Tupelo market when it was launched.
FRANKLIN: We never showed in Tupelo itself but we do have a showroom here at the factory. We’ve got an airplane and we bring major accounts to our factory. We can pick accounts up in Detroit or Chicago for example in the morning and spend six, seven hours here working on new product with our product development group and have them back home that evening. Some we bring in twice a year and others once a year. It's really better than a market, we have their full attention here on our own turf.
We also show in a 22,000-square-foot space on the 7th floor of the Home Furnishings Building in High Point. But we'll bring majors here where they also see our facility. We get the “wow” factor.
INTERVIEWER: Is High Point the only market you show at now?
INTERVIEWER: Did you consider showing in Las Vegas?
FRANKLIN: We showed there for three years. We could not justify the cost, it didn’t make sense for us.
INTERVIEWER: How much business do you actually do in High Point?
FRANKLIN: We do a lot of business but we also do a lot of show-and-tell. Today we don’t write orders at market like we used to. But major accounts will select product there for their program for the next season, the next six months. So we program but don’t actually get the orders there. What we get are placements or slots on retail floors and we know the orders will come later. We hardly ever write orders per se unless we've got a market special on close-outs or covers that need to move. However, the High Point market is very important to us.
INTERVIEWER: You don’t consider yourself a promotional upholstery company?
FRANKLIN: It’s not our niche. It depends on the definition of promotional. No we aren’t a promotional manufacturer by Mississippi promotional definition. I’m not saying we don’t do some promotional prices on occasion. But we're a mass-market, high-volume producer of middle market product.
INTERVIEWER: Tell us more about your vertically integrated production system. I assume you cut foam but don’t pour it, for example.
FRANKLIN: We buy in buns like big loaves of bread. We have German CNC machines to cut the foam to patterns. We get great yield with very little waste. We cut the foam into arms, cushions, backs, and we can do it quickly with little inventory. If we need 28 seat cushions by 10 o'clock tomorrow morning, we do it on the night shift.
We run three shifts in our frame mill. Our CNC machines run 24/7 to get maximum efficiency. We have 14 of these machines. The first ones we bought were German made and we've since bought American-made machines. You can set them up to bore or cut vertical and horizontal and you can change the program instantly with the new software. Our old frame mill is obsolete now. We can make frames at night on second shift and have them ready to upholster the next morning.
Going to lean manufacturing also gave us more standardization of parts. The same rails interchange with 90 to 100 reclining chairs. We produce 1,800 chairs a day. So that’s 9,000 per week. It drives down costs and the yield factor is just amazing. Before we would rip hardwood and if we got sixty percent yield, we'd say, “Man, that’s great.” With the new CNC machines, we get 98 percent yield on four-by-eight flat stock.
So we stay on top of all the technology that makes us efficient. A lot of the smaller plants still use band saws, for example.
INTERVIEWER: Do you still cut and dry your own lumber?
FRANKLIN: No, we don’t use any lumber now. It’s all what we call frame stock — 4’ by 8’ sheets that we feed into the CNC machines. Weyerhauser and Georgia-Pacific are our key vendors on this product.
INTERVIEWER: What about fabrics? That's got to be a major cost for you, right?
FRANKLIN: That’s correct. I think Culp still makes one or two velvet patterns here in the states, but almost everything else is made in China and that could be a huge problem if something happened, politically or otherwise, to disrupt production. We’d be in big trouble because there’s almost no fabric made here.
INTERVIEWER: So how do you deal with the selection, ordering and handling of fabric in this new world of very little U.S. production?
FRANKLIN: One of the major challenges today for a company like ours is global supply chain management. It’s a key issue and it’s a very difficult process. China today has many problems. The mills can be shut down for all sorts of reasons, economic and political. They tell you they can't do something because of the Chinese New Year, which maybe was a month ago. Well, they tell you, a lot of our workers go home for Chinese New Year and a lot of them never come back.
Since we can't be certain of getting the fabric we need even if we order it 12 to 15 weeks in advance, we would like to do more cut-and-sew here in house. We’ve got over 300 Pfaff German-made sewing machines. We're only using very few of them now, but they're oiled and ready to go. I believe we will one day use them again for domestic production
Since there are virtually no fabric mills here, at least in our niche, the solution is to order well in advance and stockpile the fabrics, then cut-and-sew in America. To get the fabrics, we will probably have to pay a duty, go through all the bureaucratic red tape, or get it from a country where you don’t have to pay duties. We must continue to make progress in global supply chain management going forward.
INTERVIEWER: So you’re still depending on cut-and-sew from abroad, but you’re thinking you may need to do more of it here in Houston?
FRANKLIN: That's correct. We do some here now. Global supply chain issues are different in case goods, but in upholstery most of it comes down to fabrics and all the SKUs and colors involved. Importing cut-and-sewn covers has been the main solution up to now, but it's far from a perfect solution. One of the things really affecting margins across the board is obsolete, cut-and-sewn imported covers that just didn’t sell as projected. Then there's the opposite situation, when a cover sells much better than you expected. The retailer is screaming for delivery, but you can't get the covers quickly from offshore. You never guess right and it's always somewhat of a guess. Then we are stuck with the obsolete inventory.
INTERVIEWER: Is it any different with leather covers? Leather is quite popular these days, right?
FRANKLIN: Yes, but leather’s pretty well confined to maybe three hot-selling colors and a lot of it is still in the brown family. That’s one SKU and you can get it from four or five major suppliers across the country. You've got more control because there are less SKUs to inventory.
INTERVIEWER: Have there been major changes in style and design since you founded Franklin?
FRANKLIN: Oh, yes. But let's be honest. There’s not a lot you can do to make a recliner look a lot different. You've got to have the right styling and the right cover. But it really comes down to comfort with maybe ease of operation second. With a reclining chair you want to relax and be comfortable.
INTERVIEWER: That means better foam, perhaps?
FRANKLIN: Yes. We’ve just brought out our Wow! seating foam. It has a slice of gel in it, like used in the mattress industry, then we put fiber on top of that. It’s about six inches thick.
INTERVIEWER: And it’s not that expensive?
FRANKLIN: We’re talking a reasonable cost. We are incorporating it in all of our seating, both motion and recliners. It’s something to talk about that our competition doesn’t have, or at least not yet. We work hard to offer things that have practical selling features that everyone up and down the street doesn't have. The styles change but better comfort can't be beat.
INTERVIEWER: What about developments in mechanisms?
FRANKLIN: We’re continually tweaking mechanisms. We made a major change this week to our rocker recliner mechanism resulting in purchasing two dies at about $18,000 each to make the changes. We use a lot of Leggett & Platt mechanisms and metal bases but the two major mechanisms we use we manufacture in our own facility. We continually improve the workmanship and we test everything in our laboratory. Any complaint we get involving mechanisms, we jump on pronto and many times that might involve a change. Mechanisms were a major problem prior to building our mechanism plant. As I recall, they were up to 80 percent of our field problems.
INTERVIEWER: What about labor? Have you ever had any problems getting labor?
INTERVIEWER: Have you ever had any union problems?
FRANKLIN: No. One of our earlier labor attorneys once told me, “You won’t ever have a union because you treat your employees the right way and better than a union does.” We try to take care of our people. We have company picnics, we give them hams and turkeys for the holidays, we do all those kinds of things. We also have a medical clinic in our plant that’s open Monday, Wednesday and Friday. Our people go to the medical clinic on company time. Our employees are a key to our success.
We did have a defined-benefit retirement plan but we froze it in 2004 and replaced it with a 401(k) plan. The defined-benefit plan was just becoming too expensive. We're still paying for all the folks who were on that plan but it's no longer available to new employees.
INTERVIEWER: What would you say is the greatest challenge facing your company today other than global supply chain management, which you talked about earlier.
FRANKLIN: It is to do business with companies that are well capitalized and that know how to do business in our current economic climate and very importantly can pay their bills on time. Customers that can't pay their bills on time have been a real issue in recent years since the recession hit. The number two challenge is to determine what we can do for those solid retailers that our competitor can’t do whether it’s a good product, delivery, price, whatever. That’s a moving target and it’s changing every day so we have to be able to respond to change quickly.
We can compete with anyone out there. We just have to stay sharp, stay focused, continue to offer a great product at an outstanding price. We must give customers a reason to buy from us. Friendships are great but you have to be competitive, the product has to fill a need and the retailer has to make a profit.
INTERVIEWER: When you consider a new account, who checks into their credit-worthiness?
FRANKLIN: Our CFO who is also a CPA oversees our credit operation. If there’s an issue we’ll insure the account. Most of our accounts are rock-solid. As I've said, we don’t solicit business from accounts that don’t have good credit. The best advertisement is a satisfied customer. Retailers talk among themselves and they know who can do what.
We're getting business through some of the buying groups which have become much more important in recent years. It’s the only way the one-store or two-store operations are going to stay competitive, at least if they're price-oriented.
INTERVIEWER: Do you go to the buying groups' dealer shows?
FRANKLIN: Yes. Some of our people just got back from the Furniture Marketing Guild show in Vegas. We go to several of the buying group shows. They’re a vital part of the industry today.
INTERVIEWER: Tell us more about your involvement in industry trade associations. Was it something you wanted to do from the very beginning? What did you see as the benefits of trade group membership?
FRANKLIN: When our company went into business the trade group was the Southern Furniture Manufacturer Association. I always wanted to meet other people in the industry, always wanted to know what was going on. I always thought I could learn a lot from my peers. So I started going to the meetings. I remember the first SFMA meeting I went to. It was in New Orleans. A guy from Broyhill was president that year. I can't remember his name. It wasn't Paul Broyhill. I got to know him later — a great guy. In fact, I once met Paul Broyhill’s dad, an elderly gentleman in his 80s then. I mostly just listened. I was a young kid then. I’m saying to myself, “This is a wise man.”
I became active on some of the SFMA committees. I remained active after the SFMA merged with the northern factory group and became the American Furniture Manufacturers Association. I picked up a lot of information. Some of the officers came to me one day and said, “We’re going to nominate you for second vice president. I said, What does that mean? They said, It means you’ll be second vice president, then first vice president, then president elect, then president, then chairman. It’s about a six-year deal.” So I went through the chairs and I was appointed to the executive committee which consisted of the officers and treasurer, I would listen to those people and ask a lot of questions. These were the leaders of the industry and I was very fortunate to learn from this group. I learned a lot about the industry. Then I became president and was involved with all facets of the organization.
I also became involved with the Mississippi Manufacturers Association and the Mississippi Economic Council, and served on the boards of both. I serve on the board of BancorpSouth, a holding company with about 232 locations. I serve on the board of North Mississippi Health Services, one of the largest rural hospital companies in America. I serve on the nonprofit CREATE Foundation board and on the board of Northeast Mississippi Daily Journal Publishing Company, one of the largest newspapers in Mississippi.
INTERVIEWER: How do you find the time?
FRANKLIN: Lots of people ask that. But serving on those boards has been a great, great positive in my career. Working with successful people in other businesses has really helped me, helped my professional development. These outside activities have been very important to my development over the years.
INTERVIEWER: Do you consider yourself a mentor to people here at Franklin? Do you consider that one of your major roles?
FRANKLIN: Oh, yes. Developing leaders. Not only at our company but in other places like our church. I try to be an example to other people.
INTERVIEWER: Who have been the major mentors to you?
FRANKLIN: A lot of people who probably don’t know they've been mentors. They're the people who were the early pioneers and considered the fathers of the industry. Through the Mississippi Manufacturers Association, the Mississippi Economic Council, and through my association with Mississippi State, I've met a lot of very successful business people. As I mentioned I've read all of Jack Welch's books. I think he was a master leader and industrialist.
Becoming a member of the BancorpSouth board of directors at an early age gave me a great learning experience and being a member of the Executive Committee and later becoming the Lead Director of the bank gave me leadership opportunities in a major public company.
Those are the kinds of people I’ve followed over the years or had some association with, that have taught me a lot about business.
INTERVIEWER: So you've served on the board of a bank, but you’ve never borrowed from them as a businessman?
FRANKLIN: No but we have always done our banking with BancorpSouth. After I exceeded that five-year estimate in nine months, the CEO of the bank came to see me a year or two later and said, “We need some young successful business people on our bank board. Would you like to join our board?” I knew people who had been trying to get on that bank board for years. So I gladly accepted.
INTERVIEWER: Could the American industry have done anything that would’ve prevented the massive off-shoring of production? You've obviously been able to survive, but a lot of the industry has not.
FRANKLIN: Since we’re privately owned, we’re more flexible. We can make decisions faster. We can react to issues that if left alone would become devastating. We can react to those issues much more promptly and in a more cost-efficient way.
Here’s what I think about off-shoring. It wasn’t caused by greedy manufacturers trying to increase margins and make more profit. In our case, it was our retailers demanding low prices to be passed along to their customers. As we said earlier, this marketplace has been particularly price-driven for the past five years and even more price-driven in the past 24 months. It’s all about price. That’s been a disaster for our industry. I think people will still pay if you've got what they want. But today the retailers insist they've got to have that low price, even though they aren’t making any money either. No one’s making any money. It's crazy.
With that kind of price pressure, production is simply going to go where the costs are lowest, particularly labor costs. Well, .68 cents an hour certainly is lower than $16 an hour. That's the situation the American industry was confronted with in 2000, 2001. With that kind of arithmetic you just can’t compete. That's when we moved most of our cut-and-sew offshore. If we hadn't done that we might not be in business. We wouldn’t have 1,200 employees, that’s for sure.
Today the big picture is that it was all brought on by the consumer. Go to Wal-Mart or Costco any afternoon, but particularly Friday afternoon, and you'll see truckloads of product being rolled out of the store. I'll bet you 90 percent of it is made offshore. The Occupy Wall Street people, and some others too, say it's those greedy CEOs trying to make more money by going offshore and taking our jobs away from us. No, consumers are driving the price. We just have to work through a difficult situation. In our case we'll probably need to bring cut-and-sew and some components back to America, make it better and trust the consumer will want to buy it. But the consumer sometimes doesn’t know what they want. They have to be sold. But it can't be only price, price, price. Ultimately tho, the consumer drives the pricing in our industry.
INTERVIEWER: Isn’t one of the reasons you were able to succeed in the face of offshoring is that you were willing to invest millions of dollars in technology?
FRANKLIN: Definitely. Many companies didn’t do that because they weren't creating the cash flow to reinvest in the business, and the banks weren't going to loan in the business climate in that time frame. A lot of companies obviously weren’t making any money. Regardless, in my view if you aren’t investing in the business and making the business better every year, you’re going out of business. You probably won't realize it at first but in a few years you’ll be out of business. That’s just the way it is. That’s the way business works today.
INTERVIEWER: Consolidation has been a major trend in our industry, both in retail and manufacturing.
FRANKLIN: That's true.
INTERVIEWER: But you see no advantage in being part of a conglomerate, or a bigger company?
FRANKLIN: Consolidation in our industry has been a question mark in my view. You see some successes but you also see a heck of a lot of failures. How bad is Furniture Brands? How bad is it that five of the greatest brands in the industry have been dragged through bankruptcy as part of Furniture Brands? How bad is that? And here’s a much smaller privately-owned company that started almost 45 years ago, and we’re doing pretty good.
INTERVIEWER: You’ve been able and willing to change.
FRANKLIN: Yes, or we wouldn’t be here. At some of our staff meetings, I've said, “Guys, we've got to figure it out, we've got to have vision. It’s not working, so how do we figure it out?” Instead of asking somebody else to do it, ask yourself, “How can I help figure this out?” There will always be something to figure out, maybe a lot of things to figure out. Right now we’re trying to figure out global supply chain management. We’re really putting a lot of effort into that.
INTERVIEWER: It’s hard to have good personal relationships, good working relationships with people on the other side of the world, right? Especially when the culture is so different.
FRANKLIN: Right. What I find that's really missing is trust. It’s just not there. At least that's our experience, and we’ve been working with companies over there for 14 years.
INTERVIEWER: How do you mean?
FRANKLIN: We buy cut and sewn kits from China and we’ve worked with several vendors. It always seems to start out well enough, but all of a sudden we have issues with either delivery or quality or both. Our most serious issues have been when the specs have been changed.
INTERVIEWER: The cliché is: You don’t get what you order, you get what you inspect.
FRANKLIN: Right. But you can't inspect 100% of everything you get. For the first six months, everything is great. We inspected extremely well at first, which is very expensive and things were fine. The trouble doesn't start right away, on the first shipments. It’s after everything gets going and you’re ordering a lot of volume, container after container. Then all of a sudden there is a tendency for bad things to start happening.
INTERVIEWER: Isn’t one solution to have your own person over there at the factory or mill to inspect things before they're shipped?
FRANKLIN: Yes. We don’t have anyone on the ground over there now. But we’ve talked about hiring such a person and we have interviewed applicants. We have sent our people over, sometimes for a week or two at a time, to show them how to do things. Then we find they've knocked off our designs and sold them to someone else, even to our current customers.
INTERVIEWER: Were you involved in the Home Furnishings Council, the industry's joint effort to encourage consumers to buy more furniture?
FRANKLIN: Yes. I was president of AFMA during that time. The HFC was a sponsor of the Miss America pageant in Atlantic City, and I actually attended that. Kathy Lee Gifford, Frank Gifford and a lot of celebrities were there. Kathy was an HFC spokeswoman. The HFC did some commercials, a publication and a TV show, but it was hard to recruit members and get their financial support, especially from retailers. We supported the HFC but after about three years it just kind of went away. Working together has never been easy in this industry. We've been disjointed on trying to make the industry better. A lot of people and companies just want to go their own way.
The industry could cooperate on a lot of things, like transportation. I used to give talks at seminars about manufacturing. I wouldn't reveal any intimate secrets but I would share things about our work processes. Our industry’s never been known to really work together in that respect. We tried to do that with the Home Furnishing Council but it never got enough momentum.
INTERVIEWER: Have you ever participated in other business enterprises outside the furniture industry?
FRANKLIN: No. I’ve really stuck to the industry. I've had a lot of proposals. People would come to me and ask me to help them start a business or to invest in their business. I've always declined. I tell them, “I’ve got a full plate here.” I’ve never really wanted to get into any other business. There's so much opportunity here. We can always do better.
I take a lot of pride in the fact that we’re a big part of this community. For example, Houston needed a tornado warning system but didn't have the $10,000 it would cost. So we bought one for the city several years ago. We’ve done many other things for the community involving financial support. I’ve encouraged our people to get involved in the community. Our chief engineer runs a basketball program every January and February for kids, 400 to 500 strong. It takes a tremendous amount of his time on Saturdays and at nights. We've got other people who serve on the school board and the boards of various other agencies. Our people are dotted all through the community. Most of them grew up here. Not very many people in small towns are able to stay in their community and make a good living for their families. It just makes you feel good that you’ve been able to make a difference in the community.
By community, I mean not only the town but the whole county. Our county has about 18,000 people which is not very many people compared to even Lee County next door. One reason we have not sold the company is that an outside owner would surely take money out of the community. I don’t want to be known as someone who's just greedy and wanted to cash in and the community took it on the chin. The county's recent United Way campaign raised about $120,000; over $100,000 of that came from Franklin Corporation.
Some years ago I got a few community leaders together and said, “We need a Boys and Girls Club. We’ll fund it for two years.” I think that cost us some $168,000 per year. I told them we would fund it for two years but they'd have to go to work and raise money so it would be self-funded after that. They said, “Yes we can.” It happened that we funded it for six years and last August we stopped the funding because we could no longer carry this load without community support. There were other things we wanted to do. We had invested well over half a million dollars in the Boys and Girls Club.
We want to be good citizens, especially in a little town like this. Back in 2003 or 2004 I gave a million dollars to help launch the Franklin Furniture Institute at Mississippi State. They offer furniture courses, do research, have testing labs, those kinds of things. They teach courses in furniture manufacturing and engineering. They collaborate with the architecture school to teach furniture design. They also collaborate with the engineering school, the forestry school and the business school. It’s not a separate school itself but a track of study. They've had up to 30, 35 students at a time. We've hired a few of the graduates. I also support scholarships at three other colleges.
I don’t want to sound egotistical but I take pride in all that. Making money is not everything. I feel good about doing things for people. The furniture efforts we've got at Mississippi State has really helped our industry and will continue to help our industry. It’s also helped educate some kids.
We’re all going to leave this earth one day and then we'll have our score card checked to see what we've done both good and bad, hopefully the good will outweigh the bad.
INTERVIEWER: Have you ever taught any classes or seminars yourself?
FRANKLIN: I’ve spoken to some classes. I've even spoken at Ole Miss, which is a big rival of Mississippi State in athletics. I talked about how we got into the motion sofa business, about how to develop new product. We talked about the marketplace.
INTERVIEWER: I’ve always associated motion furniture with Jim Muffi and PeopLoungers.
FRANKLIN: Muffi introduced motion at Action but Bo and Mickey decided they didn't want to do motion so Muffi started PeopLoungers and one could say he popularized this segment. Our company needed to have motion to be a more complete resource to our customers. Motion was taking away some of our recliner business because it was matching recliners with sofas and loveseats. So we felt compelled to add this category to our product line.
More recently we started producing medical lift chairs. In 2012 we made over a hundred thousand lift chairs. Last year wasn't so great because we were hit with the uncertainty surrounding Obamacare but we think the future looks good because the population is growing older and Medicare pays most of the cost although they don't pay as much as they once did.
We're always looking for new ways to grow our business. When we see an opportunity we try to get a plan together and then execute the plan. A plan may seem great but it really is about execution.
INTERVIEWER: Have women’s issues have ever affected Franklin? I assume you have a fair number of women employees, correct?
FRANKLIN: Oh, yes. I would say women are probably 35 percent of our work force. We've got a lot of women that are good upholsterers also.
INTERVIEWER: Women historically have been under-represented in the furniture industry, although research indicates they make about 80 percent of the furniture buying decisions.
INTERVIEWER: Do you think the industry focuses so much of its advertising on price because women are so price-conscious?
FRANKLIN: Manufacturers and retailers have to accept much of the responsibility for that. We stress price so much that it becomes people’s perception. Price becomes such a big deal, and we can’t seem to overcome the perception we have created in our industry.
INTERVIEWER: How would you describe your management style?
FRANKLIN: Very hands-on. Every morning for years – until just a few years ago as our facilities grew and became spread out – I spent the first two hours in the plant. That’s when we had about 500, 600 employees. I basically knew all their names and I would speak to most of them every morning. We started work at 7 and I would get back in the office about 9:30. So about two-and-a-half hours I would be in the plant. I would be in the lobby when they came in at a quarter till 7 and they saw me there. I thought that was important. I know they did too.
Recently, I’ve been able to delegate some of that sort of involvement, but you can’t delegate your personal traits that employees look to you for, and will always look to you for. Our employees still want to see the CEO so I am in the plants as much as possible.
We just had a Saturday morning meeting at 7 o'clock in our cafeteria here with our Logistics company. We gave out $29,000 in safe-driving awards to about 40 drivers. We do that because we want to tell them how important they are to our company. They are the ones who see our customers every day.
INTERVIEWER: You have a lot of truck drivers.
FRANKLIN: Yes. We've got a big logistics company. We’ve got about 54 drivers. We cover the area to the west coast, Canada and from Miami to Maine.
INTERVIEWER: Do you have significant international business?
FRANKLIN: Relatively small compared to our overall business. We do have international customers we have done business with for many years.
INTERVIEWER: Tell us about your relationships with competitors.
FRANKLIN: Some of my best friends are competitors. I have very cordial relationships with other members in the industry. There's nobody out there that I dislike or that I’ve got bad feelings about. A few folks I respect and like better than others but I don’t have any enemies. With suppliers, we pay on time, and that's a key to a good relationship. There's integrity. We trust them, they trust us. The same with our customers.
INTERVIEWER: But you've had problems finding trustworthy fabric suppliers.
FRANKLIN: Culp is basically the only fabric manufacturer left in the United States. Rob Culp and I have been friends for 25 or 30 years. We do a lot of business with Rob and we’d like to do more.
INTERVIEWER: Tell us about your relationships with retailers.
FRANKLIN: I have many long-term relationships developed over the years with our major accounts.
INTERVIEWER: How will you know when it’s time to turn over the company to your sons?
FRANKLIN: I haven’t gotten there yet but I think I’ll know. I still feel good.
INTERVIEWER: You obviously don’t want to walk away from the business.
FRANKLIN: I don’t really see myself giving up my office. Well, at this point I say that in jest. No, I will. But I trust it will be a gradual process.
I’m going to retire from the bank board a year from April, and I’ll be getting off some more of the boards I'm on. I've got a farm four miles from downtown Houston, about 400 acres with three big lakes, a lake house and lots of pecan trees.
INTERVIEWER: What sort of farming do you do there?
FRANKLIN: Just recreational farming. We have deer running everywhere. We planted 160 pecan trees. I like to drive the tractor and do the normal chores. There's about 20 acres of lakes. I like to go to the farm and spend days there.
There’s a lot of things I have an interest in. I like to visit some of the schools where I sponsor scholarships.
INTERVIEWER: How about golf? It's popular with industry people.
FRANKLIN: While a lot of people were golfing I was building this company. I do hit some balls occasionally and play a little. I am not a serious golfer. I’ve got a nice set of Callaway golf clubs, but I'll bet it’s been over a year since I’ve had them in my hands.
INTERVIEWER: What do you consider your greatest personal contribution to the industry?
FRANKLIN: That’s a tough one. Probably my greatest contribution to the industry was the period of going through the chairs at AFMA. Those six, seven years I spent as an officer and as president and as chairman and on the executive committee, doing a lot of things for the industry — brainstorming and discussing important industry issues, visiting Washington and talking to our senators and representatives.
When Trent Lott of Mississippi was Senate Majority Leader, I invited him to come speak to our AFMA board of directors on several occasions.
The industry has provided a wonderful opportunity for me. As for what I've done for the industry, I would say that my association with the American Furniture Manufacturing Association, working with Doug Brackett and then Andy Counts, would probably be a major point.
INTERVIEWER: Wouldn't starting an American manufacturer that remains successful after 44 years of domestic and foreign competition be an important contribution to the industry in itself? It's certainly an impressive accomplishment.
FRANKLIN: It’s about staying focused – working hard – and beating the competition. But I would hope people would look at our company and say not only that we have weathered the storm but that we remain a very viable company. And very importantly, we have operated our company on the basis of fair play and honest values in our product line, and built upon integrity in all our business dealings. I think that’s a major accomplishment, given what we’ve been through in the past 10, 15 years, starting in the late '90s when the move to offshore manufacturing became a reality. A lot of companies, some of them a hundred years old or even older, have gone out of business. And a lot more are still struggling.
Here in northeast Mississippi since we’ve been in business there are probably 20 plus companies that at one time were pretty neat companies and pretty well positioned who are no longer around.
INTERVIEWER: Thank you so much for your time. It’s been a great pleasure for me and your story is an important one for the industry.