Rent-A-Center

From a TV for the family room to the sofa to sit on and watch it, Rent-A-Center provides an easy, affordable way for people to get the things they want for their home today, without incurring a continuing obligation or having to use their credit. Rent-A-Center, Inc. of Plano, Texas, is America's largest chain of rent-to-own stores. The company owns and operates nearly 2,300 stores in all 50 states, plus Washington, D.C., and Puerto Rico. In addition, a wholly owned subsidiary, ColorTyme, serves as a national franchiser of rent-to-own stores, with 333 units under the ColorTyme brand and 13 under Rent-A-Center. All showrooms of both brands offer furniture, appliances, home electronics, and other accessories that can be rented by customers, who may terminate the contract on short notice or gain ownership of the merchandise after reaching a stipulated rental period. Payments are made to the stores on a weekly basis. Many customers turn to Rent-A-Center and its competitors because of a temporary need for household merchandise. These include college students, military personnel, people going through divorce, or businesspeople on short-term assignments. Other customers, however, are simply strapped for cash and have poor credit ratings and turn to rent-to-own stores as a way to finance the purchase of necessities or luxury items they cannot afford. While Rent-A-Center and its competitors insist that buyout provisions are offered as a courtesy to customers, and they point out that a sizeable portion of customers terminate a rental contract long before it runs its course, the industry has gained a reputation for price gouging and taking advantage of the poor because the final cost of merchandise is far higher than the retail price. Rent-A-Center has been involved in considerable litigation over the years and has been forced to pay settlements for charging exorbitant interest rates. The company insists that it is primarily a leasing business, not a credit operation, and that its customers are not locked into contracts, yet the entire rent-to-own industry continues to suffer from a poor image. Nevertheless, Rent-A-Center has enjoyed healthy profits, enough to ease investor concerns over the company's reputation, warranted or not. The roots of the rent-to-own business reach back to the 1950s when a number of people pioneered the concept. For instance, Charles Loudermilk, Sr., founder of Atlanta-based Aaron Rents, started out in 1955 by renting Army surplus chairs for ten cents a day. The founder of Rent-A-Center was J. Ernest Talley, widely acknowledged as the most influential figure in the development of the industry. In the 1950s he ran a retail appliance store with a cousin in Kansas. Because tightening bank credit prevented a number of customers from buying his merchandise, he hit on the idea of renting the items. If customers failed to meet the payments, he could always repossess the merchandise; if they reached the end of the rental agreement, they would own the merchandise and Talley would have made some extra cash in addition to increasing the sales volume of his appliance store. In 1963 he developed a rent-to-own chain called Mr. T's, which by 1974 had grown to 14 stores. He sold the business, which became part of the Remco chain, and he turned his attention to commercial real estate in the Dallas area. When the Texas real estate market suffered a crash he returned to the rent-to-own concept in 1987, establishing Talley Leasing with his son Michael. The new company rented appliances to apartment complex owners. Investors showed some concern over Talley's ability to make the stiff debt payments taken on in 1998, and as a result the price of Rent-A-Center stock dropped. When the company continued to post strong results, investors expressed their relief by again bidding up the company's shares. The process of absorbing 1,400 new stores was not without incident, however, as a number of inherited managers objected to the company's