The Sweet Smell of Excess

When big-shot Blockbuster alums came calling with plans to start a national chain of florist shops, little guys like John Partridge and Greg Royer thought they'd hit the jackpot.

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It was a heady time for John Partridge. Until the fall of 1998, Partridge had been minding his own business, which happened to be a highly profitable, $2-million flower shop in Augusta, Ga. Then, suddenly, he was being wined and dined by a group of former Blockbuster executives who were champing at the bit to buy his company. Their plan was wildly ambitious: to acquire 1,000 of the best local and regional florists in the country's 100 largest markets and to create a recognizable brand of flower shops. It would be a "roll-up," in which one company takes the lead and buys many smaller ones to create an instantly large company that typically goes public. For Partridge, the pitch was very seductive.

Partridge, who was then 45, had worked hard for years to build his business into the success that it was, but he was well aware that florist shops generally don't sell for large multiples of earnings. His own long-term exit strategy from the business he'd devoted his life to was less than clear.

And so, in September 1998, Partridge and nine other florists found themselves at the Hyatt Regency Pier Sixty-Six in Fort Lauderdale. The florists had been flown to Florida for a two-day "founders' meeting," and from the beginning it was clear that no expense had been spared. Among the big suits were Steven R. Berrard, who had been CEO of both Blockbuster Entertainment Group and AutoNation; Gerald R. Geddis, who'd once been Blockbuster's chief operating officer and worldwide operations vice-president; and Albert J. Detz and Adam D. Phillips, who'd been, respectively, chief financial officer and chief administrative officer at Blockbuster. "You know, I wear custom-made suits, too," says Partridge in a good-old-boy drawl. "But somehow because of their success with Blockbuster, I was in awe of these people. I thought they had the Midas touch."

Berrard, Geddis, and their colleagues were dead serious about the opportunity that the florist-chain roll-up offered. They were planning to sink $10 million of their own money -- along with a $20-million private placement underwritten by Allen & Co. -- into the venture. Blockbuster had grown from a single store in 1985 to 3,700 stores by the time it sold to Viacom, in 1994, for $8.4 billion. Why couldn't the new chain -- named Gerald Stevens after the two principal founders' first names -- do the same? "This is going to take the floral industry to a whole new level," Eric Luoma, the owner of Cactus Flower Florists, in Scottsdale, Ariz., remembers thinking. He looked around the room at his peers, and among them were Partridge, a former president of FTD (the prestigious national referral network) who was incredibly well connected in the industry; Greg Royer, whose Lebanon, Pa., operation was known for great productivity; and Tom Boesen, of Des Moines, who knew customer service inside out. Luoma considered himself a marketing expert. "We were the cream of the crop," Luoma says. "It seemed like a slam dunk."

The two-day founders' meeting, typical of the excesses of many well-financed start-ups of the 1990s, was designed to capitalize on that kind of excitement. The sponsors kicked off the meeting with a video. The florists, most of whom had already signed the final sale documents, were positioned in a horseshoe around an enormous movie screen in a conference room. The videocassette player rolled, and a finely edited compilation of movie clips -- from Casablanca, The Sound of Music, and other classics -- filled the room with a warm glow, and in all of them people were giving one another flowers. At the very end, the audience watched Humphrey Bogart deliver his famous "this is the beginning of a beautiful friendship" line.

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Donna Fenn

Inc. contributing editor Donna Fenn is the author of Upstarts! How GenY Entrepreneurs are Rocking the World of Business and 8 Ways You Can Profit From Their Success (McGraw-Hill, 2009). Both this blog and the book examine the ways in which GenY is changing the entrepreneurial landscape with new approaches to starting, growing, and managing their companies. Learn more at http://www.upstartsrock.com/.

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