Daugherty ran that one pawnshop for eight years. It was a money machine. In his first year, 1971, the shop grossed $62,000, good money in those days. But by the decade's end he was bored, so he hired a manager to run the shop. The price of oil was rising fast, and with petrodollar signs in his eyes, he sank every dime of pawnshop profit -- not to mention another $800,000 in loans -- into the oil business. By 1983, with the price of oil crashing, Daugherty was all but bankrupt.
He returned to his pawnshop and set about paying his debts. He called all his creditors each day, starting at 7:45 a.m., for four weeks. He told them all that he intended to pay them back. Every dime. Finally, they got so sick of hearing from him, they told him to stop calling. "Just send the money when you've got it."
Daugherty paid all his debts. The attendant goodwill and trust set him up for a serious foray into the pawnbroking business. He would take a disdained, unregulated, fragmented -- and very profitable -- industry, and pull it together into one corporation. Setting in place rigorous standards and relying on computer technology to enforce them would make the business hum. It would also, as Daugherty puts it, "bring a dirty business into the light." He raised about $9 million in private offerings. To expand the business and increase its legitimacy, Daugherty took Cash America public in 1987. That gave him the opportunity to go on the road in the United States and Europe and sell the company to the financial community. In places like New York City and Boston he was often met with blank stares and pointed questions. In Europe that was not the case. "They understood right away. We had $16 million worth of stock to sell. By the time we came back we had orders [from underwriters in Europe] to sell $100 million worth of stock."
Jack Daugherty labels what he has done in building Cash America "a put-together." But Daugherty was putting together pawnshops. He wasn't exactly selling frozen yogurt. That presented a marketing problem. He finally decided to position Cash America as a loan business. It was -- a bank. Like Amre, a siding company that calls itself "a consumer-response company," Cash America had been given a new definition in the mind of its CEO.
Like any well-run bank, Cash America made collateralized loans. But unlike a bank, it would make those loans in five minutes. It would lend amounts as low as $2 (at annual rates as high as 240%). No matter how often someone defaulted on a loan, Cash America would always do business with that person again. It would never string the customer up by the thumbs. (For good reason, of course. It always had the merchandise to sell if the customer didn't come back.) Cash America advertised extensively on radio and TV, "the way a bank would advertise for a home-improvement or car loan," says Daugherty. "It was a bonanza."
Cash America had no trouble convincing its core audience of what it was up to. But what about the more established world, whose first reaction was fear or suspicion of a shadowy business? Laws regulating the industry vary from state to state. "We want a good set of rules to go by," says Daugherty. A year before the company opened its first store in Florida last March, it realized there was little regulation there. It was a situation that invited rip-off artists, a situation that Cash America, a public company, could ill afford.
The company lobbied the Florida legislature. It wanted background checks on all people going into the business. Did they have criminal records? Did they have the financial capability to stay in business longer than a fortnight? Cash America wanted the hours when pawnshops could be open regulated -- just as they were for any other retail establishment. It wanted minors barred from making transactions with pawnshops. It wanted every piece of pawned merchandise to be scrupulously recorded along with a piece of identification from the seller.
Daugherty says that once the legislators realized he was there to help them, he was given a role in drafting the legislation. That, in turn, gave him the opportunity to educate them about the business and the needs it met. "We could tell them that one-third of the people in the United States have no bank account, no MasterCard, no Visa," Daugherty recalls. "We are the only alternative for them."
Cash America, like Amre, relies heavily on computer technology to impose order on a previously undisciplined business. It also uses that technology for demographic research, to figure out where to put its stores. Of course, sometimes that can seem like overkill. "You could stand in the front door of 90% of our stores," says Daugherty, "and see a Colonel Sanders Kentucky Fried Chicken, a Payless Shoe Store, and a Family Dollar store. These are our best neighborhoods."
To explain what they do, people in the barter business often invoke an apocryphal historic moment: the exchange of Manhattan for $24 worth of trinkets. The seductive appeal of the incredible deal is timeless.
The barter business in its modern incarnation is made of more prosaic stuff. Computers tie thousands of businesses into a network, permitting them to trade goods and services instantly, for "trade dollars," which they can then use to buy other goods in the system. The net effect is to decrease a business's cash outlay, increase its internal cash flow, and reduce excess capacity or inventory.
