Franklin Quest Co. and Covey Leadership Center were like the Coke and Pepsi of Utah. They offered similar products, competed for the same customers and developed strong brand loyalty.
Then came January 1997 and the shocking announcement that the two companies would come together as one.Eventually, the surprise wore off, and the merger that created Franklin Covey Co. was officially completed in June 1997. But like many marriages, this one took a while to hit its stride.
"We've taken our time. We've involved a large number of people," said Jon H. Rowberry, Franklin Covey president and chief executive. "We are pretty much where we hoped to be."
The only problem, he said, is that it took about twice as long as expected to get there.
That delay contributed to a decline in Franklin Covey's fortunes during the past year. But with the opening of its redesigned store in the ZCMI Center Mall last week and a raft of new products and symposiums scheduled for introduction later this year, the company's executives are feeling upbeat.
"I think the reasons we did the merger in the first place still seem to be valid in the marketplace . . .," Rowberry said last week. "The mood of the country is very much in line with the products and services we offer."
"My perception is we're stronger than we've ever been," said chairman Hyrum Smith, who created the Franklin Planner and started the company in 1983. "I think we finally are one company now."
Franklin's stock price was about $21 per share the day the merger was announced, Rowberry said, then went as high as $28. But as people saw how long the merger would take and that it would harm the company's earnings, he said, the price dropped to the $18.50 to $19.50 range it occupies now.
Sales at the company's 120 stores are up, Rowberry said, but not as much as he had hoped. Last month, the company announced that sales for the quarter ended May 31 would be $105 million to $110 million, with earnings between 1 cent and 5 cents per share.
"We really naively thought we would be ready by January," Rowberry said. "Instead, it took until May."
Part of the problem with the transition may have resulted from the nature of the companies, said D. Gordon Wilson, Franklin Covey executive vice president of customer sales. Franklin Quest, famous for its planners, and Covey Leadership, famous for its seminars, both staked their reputations on helping business people stay organized and efficient.
"I think it was especially difficult because we teach this stuff," Wilson said. "It put extra pressure on us to really practice what we preach."
Wilson said the new store design unveiled Friday is a result of the company's commitment to do just that. While simplification is one of Franklin Covey's primary themes, he said, many people find its stores confusing.
The design that eventually will spread to other new and remodeled Franklin Covey stores nationwide shows merchandise better, in less space, and appeals more to female customers, Wilson said.
A walk-through during Friday's reopening rush showed a bright, open store. Planner binders and refills are organized by size along one wall, while accessories have a place on shelves in the center of the store.
Video clips showing training seminars and product demonstrations are screened on a television that is set into a ceiling-high, silver pillar, and two armchairs are provided near the book section.
"It's really everything we hoped for," Rowberry said. "We're just delighted."
Heather West of Salt Lake City, a nine-year user of the Franklin Planner, said she liked the new look of the store and the expanded product line that came with the merger.
"We're all leery of mergers," West said. "But as long as it's improving efficiency and the cost doesn't increase to the customers, I think it's a good thing."
Mark Breinholt, a former Provo resident and longtime planner user, said he likes the Franklin product and Covey Leadership's message, so he thinks the two companies were a good fit.
"I think they ought to do well," Breinholt said. "It's a good program."
Comments like that give Rowberry confidence that Franklin Covey's "top line" will see double-digit growth by the new year and that should translate into positive news for the bottom line.
It also means Franklin Covey will continue to expand, both by acquiring companies that produce complementary products and by opening stores in new areas, Row-berry said.
The company already trains more than 750,000 people every year, and more than 15 million people use its planners, agendas and training products.
"Our objective is to be viewed as the premier provider of . . . effectiveness (tools)," Rowberry said. "The Franklin Covey name will be recognized for the high quality it provides."
Franklin Covey Co.
Industry: Office supplies
Close Price (6/22/98)...........$19.00
52 Week High: $28.31 Current P/E:
52 Week Low: $18.56 13.2
Avg. Daily Volume (12 Mos)......38,300
Current Market Value ($M)..........467
Fiscal Year End............August 1997
Sales ($M).......433 EPS.......$1.76
Net margin (%)...9.0 Divident...$.00
Contact: (801) 975-1776
Source: Media General Financial Services, Inc.