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Archive for Wednesday, July 27, 2011

Town Talk: Bank forcing closure of Midwest Graphics; Rent-A-Center slated for former Blockbuster building; city finds replacement for eco devo spot

July 27, 2011

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News and notes from around town:

• A Lawrence-based company that used to help fans across the country celebrate national championships has fallen on hard times. West Lawrence’s MGI Companies has laid off the bulk of its 50 employees and is in the process of closing the company, which has its headquarters at 4811 Quail Crest Place. For years, the company was known as Midwest Graphics and operated a screen printing shop in Downtown Lawrence. The company grew to become a major printer of T-shirts and other promotional items for the NCAA and some of the larger universities in the country. Often the company was selected to do NCAA championship events and bowl games. But earlier this month, the company sent an email to its employees announcing that MGI’s banking partner had chosen to no longer fund the company.

“We are no longer in control of our operation, our funds or our business,” says the letter, which the Journal-World obtained a copy of. “We have been given the option to close the doors immediately or organize the closing, given a very difficult set of parameters to follow. It is in the best interest of all of our employees, our sales organization and our customers to organize the closing as best as we are able.”

The letter does not give the name of the bank. MGI company executives Lanny Riedel and Leon Dreiling confirmed the contents of the letter, but declined to comment further.

Whether there is a chance for the business to come back in another form is unclear. The letter does say that the business has been listed with a commercial broker for potential sale.

The company had several lines of operation. In addition to its collegiate business, the company operated Kid n’ Me Sportswear, MGI Promotions, and mypromostore.com.

This year marked the company’s 25th year in business.

• A major empty spot on 23rd Street looks like it soon will be filled. Plans have been filed at Lawrence City Hall for a Rent-A-Center to locate in the former Blockbuster video and movie rental store at 1516 W. 23rd Street. Rent-A-Center currently has a store at 711 W. 23rd Street in the Malls Shopping Center. Presumably, the company would be replacing that store with this new one, but a manager at the local store said he wasn’t authorized to comment on the move. I haven’t yet heard back from the company’s corporate spokesperson.

• The city has not waited long to fill its economic development coordinator position, and it is turning to an analyst in the private sector to do so. As we reported earlier this week, Corey Mohn is leaving the city position on Friday to become director of statewide programs for Network Kansas. Assistant City Manager Diane Stoddard recently confirmed to me that the city has hired a replacement in Britt Crum-Cano. Crum-Cano previously was the director of research for Kansas City-based Lane 4 Property Group. In that job she did market and site analysis for all of the company’s retail clients. In addition, she has done retail space planning for the city of Overland Park, and has played a role in the Campustown Revitalization project in Ames, Iowa, the Bluemont Corner in Manhattan, and The Trails project in Kansas City, Mo. For Lawrence, Crum-Cano will be responsible for analyzing various requests for public incentives both for retail and industrial projects. She also will assist the Lawrence Chamber of Commerce by providing information to businesses looking to locate or expand in Lawrence.

Comments

Bob_Loblaw 3 years, 2 months ago

It says a lot (of bad) about a city when the Rent-a-Centers, thrift stores, and general home garage sales take over where the new goods retail stores can't survive. I hear the flushing sound getting louder as Lawrence goes down the tubes.

The best selection now for quality durable new goods is KC or Topeka.

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LogicMan 3 years, 2 months ago

Yes, Rent-A-Center and the like are just reverse pawn shops -- they give you stuff, and you give them money at outrageous rates.

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livinginlawrence 3 years, 2 months ago

I don't exactly intend to dispute your point about the inability of retail stores to survive in Lawrence, Bob, but do consider the business being replaced in this situation--Blockbuster. From my understanding, this particular type of business is a dying breed for reasons unrelated to the quality of the retail environment here in Lawrence. It seems that Blockbuster has seen significant losses in revenue thanks in large part to the popularity of Netflix, and even filed for bankruptcy last year.

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average 3 years, 2 months ago

It's not like RAC is new to town or anything, just moving from their current spot in the 23rd/Louisiana strip mall.

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John Hamm 3 years, 2 months ago

No comments about how quickly the "economic development coordinator position" was filled? It's almost like it was a done deal when what-his-name's departure was announced.....

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Ron Holzwarth 3 years, 2 months ago

"MGI’s banking partner had chosen to no longer fund the company."

“We are no longer in control of our operation, our funds or our business,” ,,, “We have been given the option to close the doors immediately or organize the closing, given a very difficult set of parameters to follow."

Wait a minute. Something sounds fishy to me.

There are many banks in the area, and any one of them would be able to finance the company, if it was a viable business. What exactly is the "very difficult set of parameters to follow," I wonder.

Is one of the parameters finding other financing? I'm quite sure that's what it is. If you can pay off the note when the bank calls the loan, you will get a handshake and a "thank you" as you walk out of the bank's lobby.

Years ago, I worked for a company here in Lawrence that was not really economically viable, although they made a great pretense that it was. The owners were quite open with me, and told me that if the bank called the loan, which could happen anytime, they would either have to find other financing quick, or close the doors. They were always looking for new investors, and there were no takers.

(No, I am not talking about you, I'm talking about a company that is no longer in business. You know who you are.)

So, I'm quite sure that what actually happened was that the bank called the loan, which can be done at any time. The loan contract will always make that very clear, so it should not be a total surprise. So, I think that MGI was not able to either pay it off or find another source of financing, because on the bottom line, the business was on shaky finances and the bank made the decision to limit their losses.

It's so much easier to blame the bank than to admit that your business was either mismanaged or is not economically viable.

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Ron Holzwarth 3 years, 2 months ago

Actually, I've worked for two companies that were in that situation. We all had to look our spiffy best when the bankers, investment bankers, investment firms (some were from overseas!), and stockholders came to inspect exactly what their money was invested in.

We all put on a good show for them, every time. In fact, for one of the companies I was hardly ever there, except for when I got a call to show up because some investors were on the way for an inspection.

And they never invested, dammit! Maybe they knew what we were up to. Ever see the movie "The Sting"? It was just like that!

And in both cases, everybody lost their shirts when the doors were closed. Except for the owners, because had very high salaries all along and that was a business expense, of course.

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pizzapete 3 years, 2 months ago

I don't know, they were in business 25 years, so they must have been doing something right. I've heard now is a bad time to be looking for a loan even for a business or individual with a good or excellent credit history. I expect things to get even worse considering the fact that many rating agencies are looking to downgrade our government's credit rating.

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Ron Holzwarth 3 years, 2 months ago

They couldn't pay off their business loan in 25 years?

But it is true that they could have expanded to quickly, and taken out another loan to do it. Then, the business climate possibly changed very quicky. A lot of people were caught by this recent recession.

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Ron Holzwarth 3 years, 2 months ago

"Whether there is a chance for the business to come back in another form is unclear. The letter does say that the business has been listed with a commercial broker for potential sale."

I certainly hope that they can find a buyer! I'm not an accountant, but from reading this article, it sounds as though MGI Companies has many assets, not only tangible, but also intangible assets such as goodwill.

I tend to think that purchasing the company outright would be a very good investment for an individual or investment firm that can withstand the hard times we are going through on a national basis.

And I also believe that it would be a very good idea for the city to allow some tax breaks for any new owner of the company, if that would help keep the business in Lawrence.

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pizzapete 3 years, 2 months ago

Ron, do you know who the broker is that is listing it? thanks

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Ron Holzwarth 3 years, 2 months ago

Sorry, no. The only things I know about the company is what is stated in the above article. But that's not a problem, there is no doubt that you will be quickly informed who it is if you call MGI Companies.

I think that purchasing the company could be a fantastic opportunity for someone who has the finances available to purchase a turnkey operation, and also the skills required to direct that type of organization.

You cannot start a business overnight, and this is appears to be a case where the tough part is already done.

P.S. You should read Warren Buffet's letters to the shareholders of Berkshire Hathaway if you haven't already done so. They are available onlne going back for many years. He earned a fortune for hmself and the shareholders of BRK by purchasing companies in financial distress such as this, and also purchasing companies when the owners of the company had made the decision to invest their money elsewhere. Start with the oldest ones and read right through them. They are not boring at all, they read like a novel. But, they are far more interesting than any novel could ever be!

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brickwall123 3 years, 2 months ago

It is a company out of Wichita so I've heard but do not know the name.

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GravityStorm 3 years, 2 months ago

Obama's war on prosperity continues.... another evil, profit-seeking organization bites the dust. Good job Barack...your pledge to "fundamentally transform America" is working out nicely.

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brickwall123 3 years, 2 months ago

I have a good friend that worked for this company that was in the original wave of employees that was let go. I've heard they are still trying to operate with very little staff. However the business they are still doing is shady as they are not paying sales reps commissions or royalties on licensed product. Now, this is all heard second hand and cannot be verified. I've also heard that employees have been denied their flexible spending account money and vacation time accrued. It is quite sad to see this happen to anyone.

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