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Friday, July 20, 2001


art
GRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM
Fely Nicholson, lead designer in the frame department,
looks through one of the frames. BFS Inc., which
operates the Ben Franklin stores in Hawaii,
is marking its 50th anniversary.



50 years of Ben Franklin

By Tim Ruel
truel@starbulletin.com

The family owned company that runs Ben Franklin Crafts and Ace Hardware in Hawaii is celebrating its 50th anniversary by digging in and preparing for the next century.

With Hawaii's economy slugging along for the past decade, and the onset of mainland big-box retailers, BFS Inc. is looking to Asia and the Internet for future growth. Meanwhile, the company is also tackling hard issues at home, including succession to the next generation and forging a niche in an increasingly divided Hawaii retail pie.

Tadami Kamitaki, son of first-generation Japanese sugar workers, opened the first Ben Franklin variety store in 1951 at the Kahului Shopping Center on Maui.

In 1975, the Kamitaki and the Mizoguchi families teamed up and later formed BFS, a private company. In 1978, BFS opened its first Ace Hardware in Kona.

In 1993, the company's annual sales peaked at $49 million, but then Hawaii's economic slump started to take hold, and the company's debt service began to hurt earnings. During the 1970s and 1980s, the company had opened nearly a dozen new stores, primarily through leveraged debt financing.

To trim the fat, BFS cut its total number of stores to 19 from 25 between 1994 and 1996, through closures and consolidations on several islands. The company also refinanced its debt with a new lender, and started putting money into inventory, not growth.

art
GRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM
The Ben Franklin Crafts store on Paa Street.



In 1997, sales bottomed at $34.7 million, a 29 percent drop from 1993. But with a leaner build, the company's cash flow turned around. This year, sales have returned to a forecast of $44 million. The company has 450 employees, 235 of whom are full-time.

"We're pretty pleased with where we are saleswise," said Wayne Kamitaki, president and chief executive of BFS and son of founder Tadami Kamitaki.

It's just in the nick of time. Big box retailers have started entering the market, and not just Wal-Mart. Michaels Stores Inc., a Texas-based retail craft chain with more than 650 stores in every state except Hawaii and Alaska, has expressed an interest here.

But there are benefits to the competition from big box stores, if you play your cards right, said Ann Wills, president of Craft Supply of Honolulu Inc. The big box retailers, with major promotional budgets, can create more interest locally in craft, she said. Smaller retailers can take advantage of that by tackling niche markets with a depth of selection.

"We cannot compete with them. The idea is to develop a niche -- complement the big boxes," said Wayne Kamitaki. By 1991, BFS was targeting its audience more carefully, completing its conversion to a craft outlet from variety store. The company now focuses on the everyday consumer.

Still, Hawaii is a limited sized market, now matter how you slice it, and there's only so much room for growth. "Demographically, it's a difficult business to maintain," Wayne Kamitaki said.

Since 1995, BFS has taken another tack, focusing on building markets in Japan through a separate company, Dean's Inc., and developing a Web-based venture, www.American-Craft.com.

The company has been learning the Japanese market and forging contacts, a major investment. In Japan, building leases are more expensive, and craft-buyers tend to be older and care more about technique and form in their projects. There are plenty of competitors in the market too.

Two years ago, Dean's opened its first Ben Franklin in Nagoya. Wayne Kamitaki now visits Japan six to eight times a year. The main goal is to develop a pipeline for American products to Japan, offering cheaper, one-shot orders from the BFS warehouse in Los Angeles, Kamitaki said. Over the past few years, Ben Franklin established an office in Japan and hired local employees, in keeping with customs.

To complement the venture, Dean's last year partnered with Bedford, Mass.-based Web entrepreneur Peter Russo to create American-Craft.com, a Web site that targets Japanese craft customers. Kamitaki said the investment should pay off over the long haul, when the word "dot-com" is no longer associated with the recent market crash and burn.

In November, BFS bought a Web retail store from Russo, RealBoss.com, which is geared to products for pet dogs. BFS ships the products to customers from its warehouse in Los Angeles. Ace stores in Hawaii have the products as well.

In the meantime, the third-generation leaders at BFS are looking at another aspect of the future: What happens when the fourth generation takes over? "They don't know each other. They may never have met each other," said Wayne Kamitaki. Plus, the stock would be diluted between more family members.

The fourth generation is still mostly in its teenage years, but BFS has already hired consultants to look at the matter. One possibility is bringing in some form of outside ownership, Wayne Kamitaki said.

Meanwhile, Ben Franklin's former corporate parent has been through some restructuring of its own.

The old Ben Franklin franchise was operated by Carol Stream, Ill.-based Ben Franklin Retail Stores Inc., which filed Chapter 11 reorganization in July 1996. In January 1997, the company began liquidating. In April, privately held Promotions Unlimited bought the rights to the Ben Franklin name for $3.3 million, and took over the franchise. There are now about 650 Ben Franklin stores in most states and the Hawaii franchise has led the pack, when it comes to new products, said David Larson, director of sales and marketing for Racine, Wis.-based Promotions Unlimited.

"They're pretty much a leader when it comes to merchandise mix," he said.

Tomorrow, Ben Franklin and Ace stores statewide will hold celebrations of the company's anniversary, with craft and hardware demonstrations.



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