Middle-Market Pawn Star Drives Growth Down Ethnic Path

Orlando, Fla - When La Familia Pawn & Jewelry opened its first location in Bayamón, Puerto Rico, back in 2009, it had a line of 50 people waiting at the door, according to Woody Whitcomb, CFO and cofounder of the Orlando, Florida–based pawn chain that is today estimated to be capturing more than $30 million in annual sales.

Long lines aside, the fate of the chain’s future island expansion was ultimately determined 3 years later when the firm, working closely with a consultant and the island’s chamber of commerce, secured the passage of a new law that would bring greater regulatory scrutiny to the island’s pawnbrokers.

Explains Whitcomb: “When we introduced a piece of legislation that really helped to clean up the industry, we gained instant credibility with the island’s governmental authority, and the chamber of commerce also got on our side.”

Today, 11 of La Familia’s 24 stores are located in Puerto Rico, a fact that arguably underscores its unique grasp of the traditions and culture of pawn’s most loyal customers. Inside central Florida, these customers are often Hispanic, explains Whitcomb, who says that the firm’s Spanish name was chosen to reflect the strong sense of family inside the Hispanic community.

“Of all ethnic groups, we have found the members of the Hispanic community to be the most reliable pawn customers, and this has to do with how they look upon their family members and relationships. If for some reason they can’t repay a loan, they will often call upon a family member or friend to help them,” explains Whitcomb, who says that pawn shops are often part of both the commercial and cultural landscape of the Spanish-speaking world.

Whitcomb adds that the pawn industry continues to be an important source of credit for segments of the population that require short-term cash, which is not always readily available from traditional sources of credit.

“Our regular customers have sort of a cycle where they’ll outspend the money that they make and they’ll come in on a Monday and get a pawn loan, so they’ll have gas for the week. Then, when they get paid, they come in to pay off their loan and pick up their merchandise, so that merchandise to them is like their credit card,” explains Whitcomb, who says that La Familia’s revenues can be roughly divided in half between retail sales and pawn loans.

Each store houses the two businesses in roughly 6,000 square feet of space.

“Of that 6,000 square feet, 2,500 is retail space and the rest is where we warehouse everything,” says Whitcomb, who notes that La Familia has been busy changing the reputation of pawn shops in a number of ways, beginning with the atmosphere of its stores, all of which are clean and many of which have been newly painted using bright blue and yellow — a color selection influenced by the chain having opened stores at no fewer than five former Blockbuster locations.

Says Whitcomb: “Everyone dresses professionally. The stores are well lit and well merchandised, and we make it as traditional a retail experience as possible.”

Having identified the Hispanic community as its largest customer segment, it’s little surprise that the middle-market firm views Latin America and South America as attractive markets for future expansion. “So far, you’ll find that some of the larger publicly held pawn chains have locations in Mexico, and they are discussing moving into new markets — and again, the cultural acceptance is what makes this attractive,” explains Whitcomb.

Along the way, La Familia has grown its island roots, having transferred a number of its employees, who previously trained in its Central Florida stores, to help manage its 11 locations in Puerto Rico. What’s more, the firm’s financial connections to the island were further strengthened when Puerto Rico’s leading private equity firm, Advent-Morro Equity Partners, invested $5 million in the Orlando-based firm in May 2011.

Advent-Morro’s investment was La Familia’s “second deal” — only a year earlier, Whitcomb had closed a deal securing a $15 million capital injection.

“We spent most of 2009 barnstorming the country, speaking to private equity funds and high-net-worth individuals, and it wasn’t really until the very end of the year that we were able to secure two offers,” recalls Whitcomb, who says that the firm selected the deal that was the “best fit.”