Continued from part 1 Q: Brian, I know you said you don't talk about the finances of the deal, but can you at least say whether this was higher or lower than the previous Craftsman deal? BRIAN FRANCE: Again, there's a number of ...
Continued from part 1
Q: Brian, I know you said you don't talk about the finances of the deal, but can you at least say whether this was higher or lower than the previous Craftsman deal?
BRIAN FRANCE: Again, there's a number of components to it that are different than the Craftsman agreement, that have different advertising and different other activation commitments. Some of those are subjective in nature. We couldn't comment anyway.
What's important is that we're real pleased that the financial commitment is a marketplace deal for both of us, that Marcus would not have made this commitment unless he was convinced, and he had a long opportunity to examine it, too, that there was good value. We wouldn't have made it either because we had some other alternatives and options if we didn't think they were the best partner. That's what we've come up with.
Q: Marcus, you alluded to the economy. You look at motorhome sales, down 54% in June, 56% in July, 65% in August. This isn't just a down year; these are really bad times for the sector. I'm wondering timing-wise how this jibes with that.
MARCUS LEMONIS: Well, I'll be very candid and tell you that our numbers on the motorhome side are down just barely double-digits on the motorhome side. That I think speaks volumes to what we've been able to accomplish on the market share side. Our business on a whole is down about 9%. The motorhomes are down a little bit more than that. We obviously feel some of that slowing.
But as I told Brian, as all of you get to learn our brand more, motorhome sales are one component. When you look at our brand, travel trailer sales are clearly three-to-one. We sell three-to-one travel trailers to motorhomes. RV rentals is a significant contributor. Accessories, things like grills and generators. RV service and collision repair is one of the biggest financial contributors to our business. We have a loyalty club where 750,000 members pay $20 a year to belong.
Although motorhome sales are extremely important, just like any other category in our business, we have other components first. Then secondly, our business is down one fifth of what the industry is performing at.
Q: When you said 9% down, is that sales? Is that year-to-date?
MARCUS LEMONIS: Total revenue year-to-date our business is down 9%.
Q: Marcus, can you give a timeline of how this deal came together. The sponsorship has been open for about a year. Were you interested immediately or is this something that developed more recently?
MARCUS LEMONIS: I spend a lot of time studying the marketplace. Most of the marketing for our company does go through me. I really treat it like a science. Over the last three, four years we've taken baby steps in getting involved in kind of finding out what things make sense for us and what does not make sense. We learned very quickly what partners can give us a significant return on our investment.
The Craftsman Truck Series has been clearly by far the best return for the investment. When I looked at the crossover, walking the campgrounds at some of the tracks, looked at the crossover of the number of travel trailers compared to the number of motorhomes, then I looked at the amount of hitching and towing that could go along with the number of trucks that were parked in the parking lot, it just seemed to be a natural fit.
Our brand would never need to have the global brand presence that the Cup Series has. This gave us just enough to accomplish what we needed in the mainland to grow our brand.
I will tell you that I've been looking at it for about nine months and have had really great dialogue with several key senior management folks at NASCAR. I spent a lot of time talking to people like Richard Childress and Kevin Harvick about it, getting their advice.
At the end of the day, all of our partners, including track presidents and people that we sponsor with, all believe that it was a great fit for us.
It wasn't a matter of a last-minute decision. It was something that was fairly plotted out. We wanted NASCAR to make a decision that best suited them, which is why in the last 30 days there were a number of candidates they were considering. We were glad that we were given the option and the choice.
I think Brian really clarified what's not being echoed enough today. The deal is not about the dollars and cents on its purity. If it was about the dollars and cents, we would not have been, in our opinion, the winner. It's about what we can provide to fans at the racetracks and how our product so tightly integrates with what we do.
I think, secondly, our commitment to the auto manufacturers, helping them sell more trucks by allowing them point-of-purchase materials, activation at our stores, was important. I think our willingness to allow companies who step up and sponsor teams within the Truck Series the opportunity to put their product in front of our customers, whether it's on the shelf or demo’ing or advertising in our magazine or catalogs, it really was a global package.
Our commitment is, if you make a commitment to a team or if you make a commitment to the sport, we are going to give you an opportunity to put your product, if it makes good business sense for both sides, in front of our three to four million consumers that we talk to on an annual basis.
We believe we control the marketplace with this consumer. We believe our brand dominates it. We know that there's a number of companies who are looking for an affordable mechanism to tell their story. We believe the Truck Series, along with our involvement, will give you a number of companies, whether it's Turtle Wax, whether it's a tool company, whatever it may be, a battery company, tire company, whatever it may be, we believe that our product, along with the Truck Series product, gives companies a great return on investment.
And we think we would like to help those companies understand how to best leverage that investment. We know that we have performed better than most in this arena. We're comfortable sharing what kind of tips and techniques that we've used to kind of maximize our thing. We hope to lend that advice to other people who are considering getting involved.
Q: How specifically will you activate this sponsorship? Fans are familiar to seeing the Craftsman name. How are you going to put the Camping World name out there at races?
MARCUS LEMONIS: We'll obviously still have the windshield decal, which is fantastic. We appreciate the opportunity for Victory Lane. What we're most concerned about is creating an environment outside the four corners of the track, in the campgrounds and in the parking lots of those environments, whether that's offering a special NASCAR weekend package on the rental side or having our store at the track where people can buy chairs and grills and exhaust protectors, whatever they're called, we want to bring our product. We've done that in almost 11 tracks across the country. Our goal going forward is when the track thinks it makes sense for us to be there, when we think it makes sense for us to be there, to have a store at track where people can get the convenience items they need once they're engaged and are there for three or four days.
Our activation is about experiencing our product, and our activation is about allowing people to take our product to the racetrack to make it more convenient. Because, generally speaking, there's not a hotel. The race drivers use them. The team owners use them. The NASCAR officials use them. The fans use them. The product integration is probably out of all the companies that sponsor NASCAR today, I've been able to kind of come to the conclusion that our product, other than the truck itself and the tires that make the truck go, our product is the most fully integrated product that exists at the track other than beer, soda, the obvious.
So it's about activating at the track and making the experience for the fan better. If the experience is better, that particular track sells more tickets. If they sell more tickets, then they obviously can promote the event more. If the event gets promoted more, on and on and on and on.
We really believe that we have seen our presence at the tracks grow. We've seen the return grow. That's how we plan to activate. It's about making the experience better.
Q: Brian, one issue I hear in talking to truck owners and teams a lot is the purses are too low. Is there a plan to increase purses in the future?
BRIAN FRANCE: I think if you ask any driver or car owner in any series in the world about the prize money, they would probably give you an answer that it's too low. So it's not surprising to hear that.
Frankly, we want to increase the purses. That means the economics of the sport are growing. It means there are more people in the stands, more people watching television. That's the path we always want to be on. But, of course, we balance that with the realities of all the other stakeholders that have to live within the economic pie that is created.
But not surprising that you would hear that.
Q: Brian, Marcus mentioned earlier there were other candidates. We've all heard some names bandied about especially in the last month or so. What was it specifically that made you and your partners at NASCAR decide this was the right fit for you? How competitive was this whole situation as far as other companies wanting this sponsorship?
BRIAN FRANCE: Well, we had a fair amount of interest. That went up and down a little bit through the summer with all the various economic announcements that were being made. But we did have some pretty good opportunities to look around the horn.
Where we landed today is where we should have landed. It was nice to hear Marcus, he and I went to dinner a few weeks ago and plotted out where this series could go if we were partners together. He made the right points to me. Hopefully we made the right points to him. I think we ended up in just the right place for this series.
Q: You have all three series now fully sponsored again. Everything is looking pretty good in that regard. Both the insurance industry and the industry that Sprint is involved in have been hit pretty hard by the economy. Is there any concern the other series sponsors may not be able to or want to fulfill their obligations?
BRIAN FRANCE: No. They're not to that level. Obviously we watch if they have challenges in either their industry or their specific business. We're mindful of that, as we will be with Marcus in the future. Their brands are on our series. It's not just another sponsorship deal that's out there; it's far more important to us. We're mindful of what is going on.
But in our view, all three companies will get through this challenging time and they'll probably all be better companies in the respective space at the end of the day.
Q: You've had all three of your top series undergo name changes the last couple years. Is there any concern about that, especially in the fan identification area?
BRIAN FRANCE: Yeah, not by design and not by choice. We would prefer there's lots of longevity with our entitlement sponsors. For various reasons, it sort of worked out that way. That's the bad news. The good news is we ended up with three very good companies who have long-term commitments and made their own decision that it's a very, very good business fit for them. And it's working.
In the case of Nationwide and in the case of Sprint, it's undeniably working even when a lot of other things in the economy or in their business may not be working as well. My hope is that Marcus will see that and it will be reflective. That's how good partnerships are judged.
Q: Marcus, how long did it take you to decide to go ahead with this deal and were there any assurances you sought to make this investment easier?
MARCUS LEMONIS: Yeah, I mean, that's a great question. It took me about two, three months to really kind of, once I got close to the finish line, to punch it over the goal line. It was a lot of wrestling with our store managers. I had a lot of dialogue with people in the field. I talked to a few consumers about what they thought. Then obviously our senior management team wanted to weigh in, kind of make sure that we were doing the right thing.
I think that the assurances that I received were really more from the economy and our business. I want to be very clear about that. We believe that the economy, from our perspective, is in a bit of a funk. What we know for certain is Americans aren't going to stop going camping. It's not just going to go away. It's not a pastime that's just going to fade away.
Gas prices are not as influential as one would thing. General consumer confidence is. When I started looking at survey reports, which kind of ranks my different operations across the country in comparison to our competitors, I was hearing from vendors and lenders how we were performing, I really felt like we were starting to gain a lot of traction on our competitors. We made an acquisition of a rental company this year. We needed to not only grow that market share, but I had new product offerings that I needed to be able to communicate across the enterprise.
Senior management in NASCAR gave me the assurance that this was a great forum and that they would do their best to not only help me communicate that message but that the media partners like SPEED, like FOX, like ESPN, would do the same.
I think, lastly, as we try to provide new and exciting opportunities for consumers to experience our brand, the assurance was that I would find and meet new people and I would find and meet new customers. That was enough for me to put me over the edge.
Q: Brian, can you talk more generally about how not only NASCAR but teams as well are going after sponsors with such a difficult economic environment. Do you see new ways or approaches that are being tried because of all the economic pressure?
BRIAN FRANCE: Well, I mean, they're just being more aggressive. Listen, I think the number is going to be close to between 80 and 100 million dollars of new money that is predicted to flow into NASCAR from a team sponsorship in '09. Now, that's lower than we've traditionally had as a rate of increase. But nonetheless, with the backdrop of the economy we're living in today, it's fairly good.
Most of the teams in the Sprint Cup level are well-funded. There are obviously some teams that aren't, but there are always teams that aren't. Some of that is based on performance, not necessarily the economy. So teams that tend to perform consistently well tend to do very well in the sponsorship area as you would think.
But is it tighter? Are teams looking to be more creative? Sure. Are teams nervous or not hearing from their current sponsors about doing one thing or another thing differently or less? Sure. That's just the nature of it. Every industry is looking around trying to get more value, trying to get more out of something that they're already doing or may do in the future. That's just the nature of dealing with and depending on corporate America to the level that NASCAR does.
Q: Are you concerned there is so much talk in the garage of merging teams as a sign of the pressure that's out there?
BRIAN FRANCE: No. That's been going on for a while and for various reasons. Teams have had alignments. Richard Childress did his engine alignment with DEI over the last year or so. There's various things that are going on and that historically have gone on, whether teams line up as a vendor relationship, get engineering. Toyota's changed the model a little bit in terms of how their teams share information.
What's important is look at the quality of competitive teams that are present in NASCAR. Just a few months ago or less, we kept hearing there were too many good teams, too many well-funded teams, too many sponsors that may have to go home. It's a cyclical situation. We'll deal with it as we always have.
Q: Brian, there's been some talk about whether or not they will limit the number of trucks a team can have. Is that a possibility? Are we perhaps looking at a spec engine down the road?
BRIAN FRANCE: Well, there's not any plan to limit the amount of trucks at this point. Although, with the Truck Series, the manufacturers are particularly hard hit because of high fuel prices in those type vehicles, the pressure on all of our manufacturers. We're going to try to accelerate items, as I said earlier, that can be very impactful to our team owners. We may take some more aggressive measures that we typically wouldn't have taken just because we think it's prudent to do that today.
I can't tell you what all they are. I know that Steve O'Donnell, his whole group, Jim, the people back in Florida, are really, really looking at this. We will come back with some intelligent things to do. It's things we should be doing anyway.
Q: Marcus, I have two things you're going to answer or not because they're proprietary. Would you mind sharing with us the number of years of this deal and would you mind sharing with us the percentage of your marketing budget that now goes to NASCAR, whether that's the east, west, this series or title sponsorships. I know those are sort of touchy, but...
MARCUS LEMONIS: The term is multi-year. If NASCAR determines they want to communicate that, that's fine. But it's multi-year. It's more than four.
Just about 6% of our total spend is in that arena. That's primarily all of the global branding that we do. About 6% of our marketing spent.
Q: Is on NASCAR?
MARCUS LEMONIS: Yes. NASCAR and NASCAR-affiliated programs.
HERB BRANHAM: Brian and Marcus, thanks very much for joining us. We had a great turnout for a great announcement. We appreciate your time.
BRIAN FRANCE: Thank you and good afternoon to everybody.
MARCUS LEMONIS: Thank you.
HERB BRANHAM: Thanks to all the media for participating. As always, we appreciate the coverage.