BY RICHARD SANDOMIR;
Published: June 9, 1991
On a mild winter's afternoon in Fort Lauderdale,
Fla., H. Wayne Huizenga slams the door of his Mercedes and bounds into a
video store on U.S. 1. The stocky, 53-year-old chairman of Blockbuster
Entertainment Corporation is engaged in an unannounced inspection of a
part of his empire, and he is not one for dawdling. In shirt sleeves,
red tie swinging, he marches along the spotless blue-carpeted aisles
under bright fluorescent lights. Every so often Huizenga stops -- to
punch up a film preview on a television monitor or to ask the store
manager about potato chip sales -- and then he soldiers on.
Along the way, the chairman allows that he himself
watches films just twice a month and rarely ventures inside a movie
house. That in turn reminds him of a former rival in video retailing who
had a different attitude toward the product. "He felt it was his job to
go to the movies every day in the middle of the afternoon," Huizenga
says. "Then at night he'd watch two more. He couldn't understand why I
didn't do the same thing."
Huizenga pauses a beat. "Well, we bought him out."
Another pause, a chuckle, a steady gaze from ice-blue eyes. "He'd have
done better if he stayed in the office."
Wayne Huizenga (it's pronounced HIGH-zing-a) tends
to business. Since 1987, he has made Blockbuster the largest national
video-store chain, with 1,582 company-owned and franchised stores last
year. And Blockbuster is just the latest example of Huizenga's growth
complex. He bought dozens of garbage haulers to create Waste Management,
his first billion-dollar company. Another buying frenzy transformed a
handful of his own holdings into a prosaic potpourri, including a
portable-toilet rental business (Port-O-Let) and a lawn care company
(Tru Green).
At first glance, Huizenga's acquisitive ways may
seem to be the only common denominator in a career that has caromed from
garbage to videos. Not so. In
virtually all cases, he has been attracted to
companies that are part of a fragmented industry filled with small,
undercapitalized operators. What he adds is a determination to cobble
together a company with a national presence -- plus the capital and
managerial muscle to make that happen.
Though Huizenga shows no great intellect or charisma
in everyday conversation, those who have worked with him paint a
different picture. In the business setting, they say, he is an
irresistible force -- disciplined, demanding, inspired. J. Ronald
Castell, Blockbuster's senior vice president of programming and
communications, describes his boss as "a classic skip thinker. He takes
your thoughts one step further and you have to work hard to catch up
with him." Says Luigi Salvaneschi, a former president of Blockbuster:
"Wayne creates discontent. He leaves you feeling what you've done isn't
good enough, that you can do more -- quicker."
However they express the thought, Huizenga's
associates point to the remarkable fit between his abilities and his
expansionist goals as an entrepreneur. "Wayne's skills," says Dean L.
Buntrock, a co-founder and the
current chairman of Waste Management, "require a business ready for change."
Huizenga has worked his changes on the video market
and lately he has turned his restless energies in an unlikely new
direction -- professional sports. Having bought 50 percent of Joe Robbie
Stadium, as well as 15 percent of the home football team, the Miami
Dolphins, he proceeded to organize and underwrite an all-out campaign to
bring major league baseball to the stadium. Many a high-flying
entrepreneur has been drawn by the glamour and excitement of big-time
sports; not Huizenga. What attracted him, he says, was the stadium,
itself: "It's an underutilized asset." Wayne Huizenga's capacity for
hard work was bred in the bone. His grandfather, born in the
Netherlands, founded Huizenga & Sons, a Chicago garbage-hauling
company, in 1894. Wayne's father, G. Harry Huizenga, was a cabinetmaker
and house builder, and as a teenager Wayne was called upon to help out
in his father's shop and to truck dirt from local construction sites. He
was 15 when his family moved to Fort Lauderdale, where he played center
on his high school football team. His parents were members of the Dutch
Christian Reformed Church, and he remembers sneaking out of the house
to see a movie or go dancing.
In 1955, Huizenga went back north and ran a
bulldozer for two years before enrolling at Calvin College in Grand
Rapids, Mich. He left before his sophomore year, eventually finding his
way back to Florida. Then a family friend persuaded
him to manage his three-truck trash-hauling
operation in Pompano Beach, and Huizenga was intrigued. First and
foremost, it was a simple, basic business that required no elaborate
training, had repeat customers and minimal overhead. When he had an
opportunity to buy a garbage route of his own in 1962, he took it.
Each day Huizenga set out on his route at 2 A.M.,
picking up garbage and toting it to the dump until the early afternoon.
Then he'd shower, dress up and spend the rest of the day calling on
homeowners, supermarkets and retail stores, soliciting new business. As
his accounts increased, he hired helpers and bought more trucks -- until
he started buying other haulers. By 1969, his Southern Sanitation
Service operated 20 trucks on routes in Fort Lauderdale, Miami, Tampa
and Key West.
The year before, Southern Sanitation had joined with
three Chicago-based companies -- Ace Partnership, Acme Disposal and
Atlas Refuse Service -- to create Waste Management. For Huizenga, it was
a kind of reunion: Both Ace and Atlas were successors to Huizenga &
Sons, his grandfather's operation, and Ace was now run by Dean
Buntrock, who had married one of Wayne Huizenga's cousins. In 1971 Waste
Management went public at $16 a share.
The vision of a nationwide sanitation company had
been Buntrock's. Huizenga was to be the deal maker, the grand
acquisitor, though the intention was to
proceed at a moderate pace. "We had a three-year
plan," Huizenga says. "It called for selective acquisitions of people we
knew." But the plan went out the window as the industry was roiled by a
wave of buyouts. Browning-Ferris Industries was snapping up the small-
to medium-sized haulers -- $3 million to $8 million companies -- that
Waste Management craved.
So over a dazzling nine-month stretch in 1972,
Huizenga and Buntrock bought 90 trash haulers, some with their own
landfills. All too often, Huizenga recalls, he would eat each of the
day's three meals in a different city. But it was during this frenzied
time that he developed some of the key strategies and skills that he
would later use to run his other companies.
The buyouts were made primarily with Waste
Management stock, not debt: Huizenga and Buntrock preferred to dilute
their ownership stakes rather than risk onerous interest payments that
could bury the company in a downturn. And they generally kept the former
owners on as managers, reasoning that if their companies were good
enough to acquire, so was their expertise.
Early on, Buntrock had recognized the impact the
environmental movement could have on their business, and Huizenga
positioned the company to capitalize on the coming flood of Federal and
state regulations governing solid and hazardous
waste. The company also moved rapidly into international trash disposal and street cleaning.
Then and now, Huizenga is quick to defend the waste
disposal industry. An unpleasant business? "I liked it," he says. "It's
not scrounging around in the garbage anymore." Mob-controlled? "That
reputation," he says, "comes from your part of the country, up north."
As it happened, Huizenga and Waste Management did have their share of
legal problems.
Accusations ranging from illegal dumping to price
fixing to mob connections to bribery were leveled against the company by
many states and cities, and a number of fines resulted. A Georgia
subsidiary, for example, was fined $375,000 for conspiring to violate
Federal monopoly laws. Last November, the company paid $19.5 million to
settle class-action suits filed in Philadelphia that accused Waste of
price fixing between 1978 and 1987. Waste Management -- now a $6 billion
company -- remains under attack by environmental groups and government
agencies for alleged violations. In 1976, Huizenga himself signed a
consent decree -- without admitting guilt -- on charges by the
Securities and Exchange Commission that the company had made improper
political contributions in Florida.
By 1980, Huizenga was ready to move along. He was
commuting weekly from company headquarters in Oak Brook, Ill., to Fort
Lauderdale to be with his
second wife, Marti, a former secretary at Southern
Sanitation. (The family includes two sons from his first marriage, and a
son and a daughter from hers.) Weary of being office-bound, he found
himself living vicariously through his managers. "These guys would come
back from the field," he says, "and I'd ask, 'What did you do? How did
things go?' You think to yourself, I wish I was there."
When Huizenga stepped down as vice chairman in 1984
and the Fort Lauderdale-to-Oak Brook shuttle finally ended, he
considered retiring from business altogether. "A frightening thought,"
says Marti Huizenga. "It lasted five weeks."
The notion that Huizenga could remove himself from
the world of business was not credible. He is totally devoted to the
chase. Seated at the cluttered desk in his headquarters -- a rented,
two-story stucco building in downtown Lauderdale -- he defines his goals
in a typically simple fashion: "I enjoy building something good and
having a successful product and making money."
Everything else is trappings, and Huizenga is not
interested. His office is decked out with scratched furniture and framed
Audubon bird prints, acquired at
an auction of the assets of South Florida Savings;
the furnishings serve as a constant reminder that he lost his $1 million
investment in the thrift when it became insolvent. Lunch is a
turkey-on-croissant with potato chips at the desk. The only symbols of
power are a framed 50th birthday greeting from then-Vice President
George Bush and photographs of Huizenga with Bush and former President
Gerald R. Ford. A Republican fund-raiser, Huizenga has hosted dinners
for Vice President Dan Quayle and other party stalwarts.
Huizenga's small features and sober mien invite
comparisons with British actor Donald Pleasence. He sits with his arms
folded, seemingly unflappable; only his eyes suggest banked fires. When
Huizenga is upset, says one associate, his eyes become "very purposeful"
and several other aides describe them as "Wayne's lasers."
In 1983, Huizenga had formed a holding company
called Waco Leasing (later renamed Huizenga Holdings because people
pronounced it "Wack-o"). Borrowing against his Waste Management stock
(he is still the largest individual share holder), he began buying small
businesses and then tapping their cash flow to pursue more businesses.
Over a frenetic three years he acquired more than 100 companies that
provided such services as auto-parts cleaning, dry cleaning, lawn
care and portable toilet rentals.
The Huizenga formula was apparent. Despite the
seeming variety, each company satisfied his criteria: a pedestrian
service business, with a steady cash flow, in an industry of
under-capitalized mom-and-pop companies ripe for consolidation.
Huizenga methodically shopped until he found the
right set of circumstances, and then he pounced. He was attracted to
bottled water, and he purchased a company in the industry that was
grossing about $4,000 a month; before he was done, he had acquired 16
more bottlers.
As he built up his list of companies, Huizenga also
made substantial investments in commercial buildings, shopping centers
and undeveloped Florida acreage. By the end of 1986, he says, his
collection of prosaic businesses had annual revenues of $100 million.
And he would soon spot his next great opportunity.
Just a year earlier, a 34-year-old Texas
entrepreneur named David P. Cook had set up the first Blockbuster video
store. It was built on the premise that consumers were unhappy with the
usual mom-and-pop video store's selection, often
limited to current hit titles, and their short
hours; dissatisfied with the nondescript ambiance of the stores; tired
of having to bring empty video boxes to a clerk who would then have to
find the appropriate tapes -- assuming they were still in stock.
To meet these objections, Cook developed the video
superstore concept that remains to this day the heart of the Blockbuster
approach. The typical store is spacious, a brightly lit
6,000-square-foot browser's feast, with a minimum of 6,500 titles. Video
boxes, with the tapes inside them, are displayed face forward within
easy reach. A typical rental costs $3 for three evenings. X-rated
videos, a longtime staple of the business, are not available.
Blockbuster had been forcefully brought to the
attention of Wayne Huizenga by a former Waste Management colleague, John
J. Melk, who had invested in a Blockbuster franchise in Chicago. "I had
no interest," Huizenga recalls. "But he kept raving about it." So on
his next trip to Chicago in February 1987, he visited one of the stores.
Huizenga rarely went to a movie. When the family
watched television, he could be found sitting in front of the set,
working. He did not own a VCR and he thought of video stores as dingy
little retailers that purveyed porno from
behind windows splattered with peeling movie
posters. His visit to Blockbuster rearranged some of those notions. What
he saw was an easy one-product concept that could be aggressively
copied nationally.
Together, Huizenga, Melk and Donald F. Flynn,
another Waste Management executive, bought 35 percent of Blockbuster for
$18.5 million. It soon became apparent that Huizenga and Cook were on
different wave lengths. By April, Cook had departed.
When Huizenga bought into Blockbuster, it owned 8
stores and franchised 11. By the second quarter of 1991, the store count
had reached 1,654. There are also 27 stores in the United Kingdom, 51
in Canada and plans for 10 in Japan by December of this year. Revenues
from its own stores, franchisee fees and product sales to franchised
stores in 1990 were $632.7 million, up 57 percent from 1989; if the
franchisees' revenues are included, the chain's total sales were $1.1
billion. Net income of $68.6 million in 1990 represented a 55 percent
increase over the previous year, though long-term debt was also
increasing by 180 percent.
Overall, Blockbuster stores account for 10 percent
of the home video sales and rental market, with revenues larger than the
combined sales of its 99 closest competitors. Last January Blockbuster
replaced Pan Am on Standard &
Poor's 500 Index
As was true at Waste Management, the pace of
Huizenga's frantic acquisitions grew in part out of fear. "We felt we
had to go fast because we had nothing proprietary," he recalls. "We had
to get the locations in each area before somebody else moved in. So it
was a mistake, but it turned out okay. We have the locations, the people
are trained and the customers are ours. Now if somebody else comes in,
they have to take it away from us."
As usual, Huizenga has sought to pay for
Blockbuster's acquisitions by issuing new shares of stock and plowing
back cash flow, rather than by taking on debt. Its $30 million purchase
of the 200-store Erol's chain last April, for example, was primarily a
stock deal. All of the 160 new company-built stores scheduled for this
year, Huizenga says, will be paid for with operating cash flow. Stores
cost an estimated $500,000 to $700,000 to equip, and gross an average of
$70,000 to $80,000 a month.
Meanwhile, Huizenga has signed up some impressive
franchisees, including the Zale family, who once controlled the nation's
largest jewelry chain (they have 23 Blockbuster stores), and George W.
Baker, a former senior executive of
Kentucky Fried Chicken (who leads a group with 26
stores). Marvin Bush, a son of President Bush, is a member of an
investor group that operates four.
Huizenga recognizes his own limitations. "I enjoy
building more than managing," he says. "What you learn from that is you
ought to bring good people in." In the case of Blockbuster,
acknowledging that he knew little about the retail business, he looked
for expertise in the ranks of the fast-food giants.
After 23 years at McDonald's and 4 at Kentucky Fried
Chicken, 58-year-old Luigi Salvaneschi was just settling into a
long-anticipated move to college teaching in November 1987 when Huizenga
recruited him.
"He came to breakfast and he talked and talked and
we had lunch and he talked and talked," says the urbane Salvaneschi.
"Then he made me an offer and I accepted. When you deal with him, you
have no choice."
Salvaneschi's major contribution was the McDonald's
site-selection mindset: blitz major markets, add stores fast and never
say "market saturation." Huizenga's special skills, says Salvaneschi,
are in finance and accounting but, beyond that, "he knows what makes
things go, hires good people and stands back to let them work."
Huizenga adds a caveat. "You always hear about delegation," he says, "but
people make the mistake of delegating and not
following up. I give authority, but I stay in touch. Otherwise it
doesn't work."
In the process, he logs 12- to 14-hour workdays.
"This place," says Thomas A. Gruber, another McDonald's veteran who is
Blockbuster's chief marketing officer, "is run like a presidential
campaign, 24 hours a day. We get in early, go home late, travel after
hours, have meetings on the plane. Wayne sets the pace and everybody
needs to move at that pace."
Huizenga writes few memos, keeps meetings short,
masters his executives' areas of expertise and constantly challenges
them. "Wayne always liked to take the adversary position on an issue,"
Buntrock says, recalling Huizenga's days at Waste Management. "He'd take
both sides and argue them well. That forced you to always think through
a decision." The newest part of Huizenga's empire is Joe Robbie
Stadium, north of Miami. Last year, he paid a reported $40 million for
50 percent of the stadium and his stake in the Dolphins; now he is
spending another $10 million to make the stadium usable for baseball as
well as football.
Huizenga is trying to garner one of the two National League expansion teams
due to be awarded this month. He has spent more than
$500,000 of his own money to promote the virtues of the South Florida
market and the attractions of Robbie stadium; his South Florida Big
League Baseball group has been named one of the six finalists. Should he
win, the entrance fee to the major leagues will be $95 million.
Huizenga actually prefers football to baseball, but
the Dolphins fill his stadium only 10 times a year. He acknowledges that
his contact with baseball may turn out to be fun, and he thinks a team
would be good for the area, but his major concern is to wring the most
financial return out of his investment.
Until his sports foray, Huizenga's energies had been
totally concentrated on Blockbuster; he owns 19.4 million shares, a 12
percent stake. (In 1990, his salary and bonus payments totaled $398,077;
he also exercised options on 320,000 shares of Blockbuster that netted
him $1,077,499, according to the latest proxy statement.) Most of the
pieces of Huizenga Holdings have been sold off, including Port-O-Let and
Tru Green, which were bought by Waste Management.
In fact, Blockbuster and the video business in
general seem to require renewed concentration. The rate of growth of VCR
ownership in the United States has been slowing down, and new
technologies could hammer the retail video
market.
In March, the stock-quote computer outside
Huizenga's office showed that Blockbuster's shares had dropped more than
10 percent in three days, after Time Warner announced an upgrade of its
cable system in Queens from 75 to 150 channels. Investors feared that
the move presaged a new era in which growing numbers of pay-per-view
channels would provide cable subscribers with the equivalent of a video
store in their living rooms.
The replacement of coaxial cable with fiber optic
cable, as in the Time Warner instance, is just one of the new
technologies. A technique known as digital compression, which is close
to being perfected, will allow up to five channels to be transmitted on
the same bandwidth now devoted to one channel.
Huizenga seems unfazed by the pay-per-view threat.
He points out that, thus far, only a third of the nation's cable homes
have access to pay-per-view channels, and that fiber optics, in
particular, is an expensive proposition. "Mainly," he says,
"pay-per-view hurts the little guys. Whatever we lose from compression,
we'll gain from the little guys."
Last month, Blockbuster's volatile stock was
hammered from 11 3/8 to 9 7/8 when Cox Cable Communications, one of
Huizenga's largest franchisees, reported
that it was trying to sell its 82 Blockbuster
stores. Says Huizinga, "We think those franchises will be absorbed
rather quickly."
Huizenga continues to be optimistic, his restless
mind churning out new ideas. Lately, he's been talking about using
Blockbuster's excess cash flow -- he estimates it at $100 million this
year -- for new businesses. "We have the best locations in town," he
says. "We've got a plain vanilla box. We can sell shoes there if we want
to. Maybe we'll build a music store that's green and white. We could
call it Chartbusters."
Photos: Wayne Huizenga in one of his Blockbuster
stores in Fort Lauderdale, Fla. He also owns 15 percent of the Miami
Dolphins (Antonin Kratochvil for The New York Times) (pg. 23); Huizenga
(in suit) with Saudi officials, 1975. Waste Management successfully bid
for Riyadh's garbage contract. (Blockbuster Entertainment Corporation)
(pg. 24) Graph: "Blockbuster's Meteoric Growth," tracks revenues and
net income, 1985-1990 (Source: Company reports) (pg. 23)
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