Lifestyle

Rich 100: Ho ho hold the legacy

At 100, Leon's Furniture still follows its founder's way.

Leon’s Furniture Ltd. marks its 100th anniversary in 2009. Founder Ablan Leon was a recent immigrant from Lebanon when he opened the A. Leon Co., a general merchandise store, in Welland, Ont., in 1909. Since then, Leon’s has become one of the largest retailers in Canada, and its success propelled the Leon family onto the Canadian Business Rich 100 in 2002. A public company since 1969, Leon’s is a brand that has long been associated with value. Upfront editor Alex Mlynek recently spoke with Ablan’s grandson — and current Leon’s president and CEO — Terrence Leon (above) about how his forebear’s principles have shaped the company, why motivating and taking care of your staff is so important, and why saying no can be the right call to make.

Why has Leon’s been so successful for a hundred years?

The No. 1 reason is we stayed true to the values of our founder. We’re a merchandise-driven company. We’ve always believed you search to buy the best merchandise that you can anywhere in the world, create the best value, and offer that to your customers. We’ve always stayed true to that. In addition, we try to do that with the other values that were created by our founder, which are fairness, integrity and trust. And the third factor is we’re a very conservative company in terms of the way we manage our finances. We don’t have any debt, we finance our expansion through our own cash flow, and we have enough income and capital to be able to handle buying merchandise at good times and difficult times so that we, again, get the best value. So those are really the main reasons. I think there’s probably one further one, and that is that our associates across the country have adopted those values, and because of that they offer the best customer service, we believe, in the industry. And that makes a big difference to those who shop at our stores.

Can you highlight contributions Leon’s has made to Canada?

Well, I guess I would say that the No. 1 is probably a pretty Canadian response, in that through members of our family, and through our associates, there’s a lot of hardworking Canadians who support their families and contribute to their country in terms of successful lives every day. As far as the company is concerned, obviously we’re most proud that we’ve been around for so long, and we’ve created thousands of jobs. We’ve done that without any tax assistance. And we’re proud to have been a profitable company for all of those years, again contributing to the wealth of the country.

Also, we were the first ones to do franchising in our industry. And franchises keep our feet to the ground. We came from a small town, and most of the franchises are in small towns. And we try to establish a franchise with people who are themselves dedicated to their businesses, are customer-oriented and follow the same philosophies we do. When you work in a small town, small-town values, which really were the same values that came from Ablan, are very important.

And you’ve been consistently family controlled since the get-go?

From the get-go.

How long have you worked at the company?

My first job was when I was seven years old. And that I still remember like it was yesterday. In Welland, we used to have a store near the downtown area. We used to have a big warehouse sale every year during the same period that the CNE was on, and that would have been the last week of August and the first week of September. And everybody in the Niagara Peninsula used to come to that sale. So we would redo our warehouse, and set it all up as a retail store. And we used to send out flyers for that, and my first job was to fold those flyers when I was seven years old. And my first pay was a bottle of Coke. I got to keep the bottle and the deposit.

Do you still have the bottle?

No. I wish. If I would have known, I would have kept the bottle. But I wanted the nickel. It was very important to me.

And then we used to work with our cousins when we were a little older. We used to have a counter where we used to sell small appliances and hassocks — hassocks were little stools — and little area rugs. We used to all sell those together during the sale. So, in any event, I always worked during the summer for the business. And then I ended up going to law school, and after I graduated I ended up coming to the business permanently, which was about 1978.

What were some unique experiences you’ve had?

Well, one of the ones I remember most was in Welland, on the trucks. It was a hot day, and we had to bring a fridge up to a fourth-floor walkup. I was never a big guy, and we had this huge fridge. The driver I was with didn’t think I was going to make it, but I did. We made it. That I remember.

The first day we bought Times Furniture — that day I remember like it was yesterday, because it meant we were moving into the Toronto market, which was a big move for us. And then there was the first day we opened our first warehouse showroom. I worked as an assistant to the marketing manager at that time, and still remember the first commercial that we did with the helicopter. We did it with Dini Petty. She used to be the traffic reporter then, and the slogan was “All the savings you can carry.” I remember that like it was yesterday. That was a big thing, opening the warehouse showroom. And I think when we remodelled Scarborough, that was a big remodelling, huge remodelling. We had a nice event for everybody there.

What’s the approach Leon’s takes to being a family-controlled company? Because that adds a different element to business. It’s not just the business; it’s also family dynamics. Do you have meetings annually — obviously, you have the annual general meeting, with the company — but I mean just with the family members?

Four families are principal shareholders in the business, and each one of those families has a nominee who relays to their family what’s going on. And those four individuals are associated with the company. And they all work together to iron out whatever business issues there are. Really, it works pretty smoothly in the sense that our founder, and the second generation, established the principle that the company comes first, and they brought up the third generation to think that way. So it’s always worked out quite well, and quite smooth, surprisingly.

The best reflection of that is in the late ’90s, the second generation passed most of the ownership onto the third generation. There’s a significant number of cousins, and none of them have lost faith in the company, in the sense that they’ve kept their shareholding. Nobody’s really sold out. They could if they wanted to, but no one has, and I think that’s a pretty good reflection of their confidence not only in the company itself, but in the relationships that have been established in the company. We’re very lucky that way. That’s a credit to Ablan and Lena Leon. They brought up their family to stay close, and to stay accepting when there was disagreement, and to be reasonable about it. That’s been passed onto the second generation, the third generation, and hopefully we’re now doing that with the fourth generation.

But you have to remember, as much as the Leon family is involved in the business, there are 3,800 associates. And those associates are really the lifeblood of the business. They’re the ones that make the difference. It’s their acceptance, and adoption of the values that were established by Ablan Leon, that really have made us the success that we are. The Leon family plays a role, but it’s only part of the role. The more significant role is the number of associates in the company, and what they do, and how they do it.

How do you get the associates enthused about the company?

The starting principle goes back to what I said about the values. The fairness, the integrity and the trust. You have to have that, not only from the business perspective, but also in the relationships with our associates. They come into a culture that is more results-driven than ego-driven. We try to establish a commonality of purpose — that everybody’s working as a team member, and that everyone has a job to do. We don’t like to establish hierarchies in this company. Where there is conflict, where there’s problems, we try to resolve it in a fair and honest way. And I think our associates see that.

In addition to that, we’ve been concentrating even more on the training of our associates. We’ve always done it to a certain extent, but over the past five years in particular we’ve spent a lot more resources in doing that. Obviously, the Internet helps a lot. We have a lot of e-learning programs. It allows us not only to teach, but to again look at the results, and to improve our programming for those associates.

So I think there’s a sense amongst our associates that we do care. We care about their success as well as our success. That makes a big difference. We’ve had profit-sharing since the early ’70s. We were one of the first companies to do that. So they have a vested interest in us doing well. Several years ago, we extended that not only to full-time, but also to part-time.

You have to have a certain amount of motivation as well, and we try to do that by staying strong as a company, by having advertising that works and brings people in the door. An associate who’s bored and has nothing to do is not someone who’s happy.

Why does Leon’s choose to remain a public company?

The fact that we’re public, obviously at this point, is not because we need the capital. But when you’re a public company, there are certain requirements you have to do in terms of reporting. And it gives comfort to all of the owners that they don’t have to worry that somebody’s doing something they shouldn’t be doing. The No. 2 reason is it also gives liquidity. If there is an owner, one of the family members that want to get out, they can get out. And you know when you can get out, and it’s your choice, it’s a big difference. And if they do want to get out, they don’t have to worry about a valuation. The market sets the valuation. So, I think those are very, very important reasons. And, you know, it’s a nice way to measure yourself as well, but those are the principal reasons.

The first downtown Toronto Leon’s location is scheduled to open in 2009 in the historic CPR roundhouse, near the CN Tower. What was the strategy behind locating it there?

Leon’s usually builds its own buildings, and develops its own. And downtown we wanted to have something that was unique, because you’ve got to be a little different to attract people down there. And then this opportunity came up on the roundhouse, and it’s a beautiful building. Buildings have always been important to us. I think you will find we put more of an investment in our buildings than most other furniture retailers in Canada, for sure. Again, that’s a bit of a reflection of our long-term thinking. But it’s also because we believe it gives confidence to our consumers that we’re going to be there in the long run. So the uniqueness in a building and the investment in a building are important to us. This location came up, and we thought it was a great location, but we had to look at it with a little different eye. We have to make sure that we adapt to the building more than the building adapting to us. Have you ever been to the roundhouse?

No.

The quality of the brick and the windows, and the light is amazing. It’s hard to believe it was an industrial building. A lot of retailers are opening stores downtown. Very few of them get 40,000 square feet on one floor. The merchandise inside’s going to be different from what we normally do. It’s going to be smaller frames, more contemporary, more modern. There will be even more small appliances. It’s going to cater to the condo market. It will be more upscale. We’re going to have community events there. One of the things we’re going to do is try to have some celebrity cook-offs, and give whoever wins some money to their charity. We’re going to have information seminars for the electronics department. Design and decorator events, and we’re looking at putting in an art gallery, too. A lot of different ideas, again, to cater to the downtown market. Now, that’s a very professional market as well. So we’re going to have to make taking care of our customers, customer service and convenience a very important element of the stores.

How do you feel about the future in light of the financial crisis?

We’re optimistic. A lot of people have told us we run our business too conservatively because it looks like we think there’s going to be a recession all of the time. There’s a certain element of truth to that. On the other hand, when a time like this arrives, we’re pretty comfortable. You know, in some ways we feel a little bit vindicated. The world seems to have gone on a borrowing binge, and it seems to have borrowed on the basis that assets can never go down — they can only go up. We try to always keep in mind that things that could go up could also go down, so we try to run our business in a way that puts us in a position that we can take advantage of that. Right now, we can take advantage of offers of merchandise at a discount that didn’t exist before. We can take advantage of the fact that we can buy some extra advertising. We can take advantage of getting some better associates, who might be concerned about where they are currently working because they don’t have the long-term potential that we do. There are also probably going to be opportunities for acquisitions or mergers as we go forward, where we might be able to expand a little quicker than we have in the past. So all those things make us pretty optimistic that we can handle this recession.

Now, it’s not going to be easy. It’s going to be more difficult than it was in the past. But, there’s also more opportunity. And where’s there’s more opportunity, and you’re willing to put in the effort, usually you can come out with a better result. We’re in a position to do that, so we’re pretty pleased.

Where does that underlying conservative attitude come from?

The principals in our business were three brothers and a sister. Our founder died in 1942, so it was really Lewie Leon, Tom Leon, Edward Leon and Marjorie Leon who werethe principals. The brothers were responsible for the operating side of the business, and Marjorie — Miss Marjorie is what she was known as — was responsible for controlling the finances. She was self-taught, and she had a strong philosophy of keeping things simple, and keeping them conservative. Making sure you always had enough money to pay your bills. She taught everybody that worked under her that philosophy.

Her philosophy has stayed with us, and I don’t think you can underestimate the two elements of that. One is keeping it simple. Don’t try to hide anything. Get everything out, and deal with your worst-case scenario, not your best-case scenario. Your best-case scenario, you’re never going to worry about. You’veonly got to worry about it if it’s the worst-case scenario. She taught us that. Because she did that, we’ve been fortunate enough that we’ve had more good-case scenarios than bad-case scenarios, but when we do have difficult scenarios we’re prepared for them.

When did you sense things were taking a bad turn in the economy?

Eighteen months ago, we sat down and said to ourselves we see a slowdown coming. We cut back on our purchases of land and buildings. In fact, six months ago we cancelled an expansion in Calgary. The number of sales we would have had to do to make money, to make a profit, were way too high in our opinion, so we just decided not to build it. We’re doing more business than we can handle in Calgary and Edmonton, we need another store in Calgary to handle the business, but it didn’t make economic sense. So that was a very difficult decision. It turns out it was 100% the right decision. And again, that’s long-term thinking.

We always believe that if we make a decision, if it’s the right thing, we’ll deal with it, and we’ll go forward. If it’s the wrong thing, we can change our minds. Business isn’t something you set in stone. On the other hand, it was less than a year ago that we bought Appliance Canada. That made sense, even though we saw a downturn. They sell to builders. They do retail as well, but their principal business is wholesale. Even though we saw the downturn, the value in the purchase was such that it made good sense. And that’s turned out to be a very good purchase, even during this slowing-down period.

What are your strategies for managing in a downturn?

You gotta watch your costs. That’s the No. 1 thing. You gotta get even better value in the merchandise that you buy, because you have to offer better opportunities to your customers. You’ve got to continue to service your customers. You’ve got to stay calm. You’ve got to be honest about your difficulties, and deal with your difficult issues. Those are the principal things. But you’ve got to be prepared to do that. It’s difficult to do that after the fact. It can be done, but it’s difficult. And we are prepared for it.

The other thing that works for us too is, it’s nice if you can continue to make your associates feel like there’s a security in working with your company. It makes a big difference when you can retain associates during a downturn. They are the people that make a difference to the customer that walks through the door. Leon’s has been very successful in the past when there’s been downturns in being able to accomplish those ends. That’s why we’ve been here for 100 years.