Best Practices: Atlanta Flooring Design Center's multi-pronged approach to diversification - May 2018
By Jessica Chevalier
Over the course of 33 years, Donny Phillips-founder and president of Atlanta Flooring Design Center (AFDC)-has grown a one-man, Duluth, Georgia based flooring operation into a $100 million enterprise spanning five states and five sectors of business: builder, commercial, retail (both traditional and outlet), cabinets and carpet cleaning. This multi-pronged approach isn’t a result of happenstance but is key to Phillips’ strategy for AFDC. “I have felt since the late 1990s that we need to be diversified,” says the entrepreneur, “and that through diversification we have a better opportunity to weather the ups and downs of the market.”
Birmingham, Alabama: builder
Charleston, South Carolina: builder
Charlotte, North Carolina: builder, commercial
Chattanooga, Tennessee: full-service retail
Myrtle Beach, North Carolina: builder
Raleigh/Durham, North Carolina: builder, commercial
Suwanee, Georgia: headquarters, full-service retail, commercial, flooring outlet
Phillips graduated from Troy State University in 1981 and then got a job with a bank in Dalton, Georgia. He worked for the bank for two and a half years before he was “pulled into” the flooring industry, he says with a laugh, as is apt to happen to Dalton residents. He was employed with a small flooring outlet in the city for two years before he caught the bug to start his own business. He honed in on Duluth, Georgia as the location where he’d set up shop. Why Duluth? “I always do a lot of due diligence before I make a decision,” says Phillips, “But if I’m honest, I chose Duluth because a friend from college and his wife told me that I could live with them there for free. I took over a spare bedroom and was up and running 60 days later.”
In spite of the somewhat impulsive nature of his decision to place the business in Duluth, Phillips says that it was a great location, “From a 10,000 foot view, there were lots of positive things happening in the city and the county at that time. It was a good area for me to have located in. Duluth was very small, and it reminded me of Dalton, where I was born, and Blairsville, Georgia, where I was raised. I fit in socially with the people and the other businesses in the area.” At start-up, Phillips focused on carpet, hardwood and vinyl. In the late ’90s, he added ceramic. Today, the Suwanee-based headquarters for AFDC is only seven miles from that original location.
AFDC has always believed that community involvement is its best advertising medium. “We try to be a light in the community so that people want to do business with us,” reports Phillips. “We believe in putting our name out there and taking care of the customers that we have. We believe it’s important to sell and install correctly. Every day we seek to earn their business. We value every dollar of business that we get, and we hope that our passion for wanting to do the best work that we can shines through.”
DIVERSIFICATION & EVOLUTION
Pre-recession, AFDC was a very different business than it is today. To start, the operation had five retail locations on the north side of Atlanta. “During our first 23 years in business,” explains Phillips, “we did considerably more commercial and retail business than builder. But in 2008, we had a great opportunity to get into the builder market, so we made the move, hired some folks, including Mark Tunick, who today is director of builder sales for Georgia and Alabama. At that time, we also decided to consolidate our retail operations under one roof and built our headquarters in Suwannee. In April 2009, we officially entered the builder market, and that transformed the business. We opened our first out-of-town branch in Charlotte, and by the end of 2012, we became more a builder business than commercial or retail.” Today, AFDC does about 68% of its business in the builder market, 20% is commercial, 5% is cabinets and the balance is retail/outlets/carpet cleaning. The retail business has four components: traditional residential remodel; cash-and-carry outlet operations; a retail cabinet business, which also operates under the builder umbrella; and carpet cleaning.
AFDC surpassed the $100 million mark in 2017, and Phillips is obviously proud of that accomplishment, but growth isn’t his central focus. “I don’t want to wake up each day and try to be a bigger business,” he explains. “I want to strive to be a better business. At the end of the day, the sales are what they are.”
To this end, Phillips, his executive team and all managers across the business are participating in management training through The Center for Leadership Studies. “We undertook a management training initiative last year, a situational leadership course, and we have 40 employees currently going through it. We are learning to be more efficient, to have systems in place, to dial down on the details of each and every job. The executive team can’t be everywhere as the business grows, and we need our managers to carry more of the burden. The course is a lot of money but well-spent-it’s very important to us to have managers who are managing and leading consistently.” Interestingly, Phillips believes that training not only produces a better employee but one who will stick around longer. “Between 2015 and 2017, we found that if we didn’t train employees well,” he explains, “our turnover rate was not good. But it’s getting better now, and we’re on the path to provide the customer service that our customers deserve from each employee.”
AFDC’s installers are all subs, and the company believes it’s important to invest in their education as well. Phillips believes strongly in the work Robert Varden is doing with the Certified Flooring Installers Association (CFI) and notes that, while it’s expensive to send installers to CFI classes, the payout is beneficial. “Not all our installers are certified, but we feel that if we can move the ball each year, it helps the industry,” he notes.
That being said, Phillips reports that consistency on the installation side of the business is the greatest challenge that AFDC faces. “We do a good job, and we know that if we do a good job consistently, that the growth and health of the business will always be there. It’s important for us to train new installers and make sure that the ones we have are trained properly. We want to make them feel that they have a future with us.”
Though AFCD already has an informational and user-friendly website, the company is currently reworking its online presence to accommodate its diversified businesses. Ultimately, the commercial, retail and builder businesses will share a site, while the carpet cleaning and outlet businesses will have their own, for a total of three websites.
Situated in Atlanta’s northern suburbs, AFDC’s retail business serves an upper middle class customer, and Phillips reports that, with regard to customer demographics, “Our ten-mile radius is no different than our 30-mile radius.” The retail business sells all flooring categories, except area rugs, though it does cut and bind area rugs from broadloom. The retail business “tiptoed” into the cabinet business in 2006, and Phillips reports that it has been a nice addition to its retail channel work.
AFDC’s commercial business serves all sectors, though it has found nice niche work in finished tenant and banking. It also completes works for general contractors and facility managers, in addition to mainstreet work. On the product front, AFDC reports that LVT/LVP and carpet tile are the categories experiencing most growth currently. Ceramic continues to be strong, while broadloom and sheet vinyl are losing share.
The company’s builder business-its largest segment by far-works with mid- to large-size local, regional and national homebuilders. It has a custom homes division and started providing cabinets to its builder customers in 2010. AFDC notes that hard surface has a much greater presence in the builder channel than it did pre-recession. For a particular price point in the Atlanta market before the downturn, builder homes had some hardwood, lots of carpet, and a little vinyl and tile. Today, for the same price point, homes have more wood, more porcelain tile, and, in certain markets and at certain price points, the company reports that it is seeing more LVT.
In addition, AFDC partners with fabricators to offer turnkey countertop business for select builder customers. However, countertops currently represent less than 1% of AFDC’s business.
While Phillips is committed to the traditional retail channel, he believes the industry is amid a time of change, and therefore it’s important to keep his ear to the ground regarding the direction it is taking. With businesses like The Tile Shop and Floor & Décor taking share, Phillips is currently considering whether the outlet model will become an even more important component of retail flooring. “This is a time in the industry when we need to be looking and listening,” he notes. “And we believe the DIY market is one that we need to pursue.”
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