BusinessTN

Some believe he’s Tennessee’s newest billionaire. The man Forbes forgot. Well, not quite. At least, not yet. Cleveland, Tenn., native W. Allan Jones, 52, is the founder of privately held Check Into Cash, the nation’s second largest payday advance company. In fact, Jones is credited with pioneering the retail concept of providing short-term cash advances for a fee, a service traditional banks simply won’t offer. When he created the business in 1993, he made the hills of Appalachia the unlikely epicenter of one of America’s fastest growing industries.

So just how wealthy is he? To best appreciate Jones’ wealth is to understand the path he took to becoming a first generation Tennessee tycoon. It’s a tale of a boy from a middle class family who sailed his first skiff along Mouse Creek in Bradley County in the fourth grade but now pilots a $25 million yacht on global waters.

Jones’ father, the late W. A. “Bill” Jones Jr., founded a small credit reporting and collections company in Cleveland in 1946. In a case of like father like son, Allan Jones’ interest in financial matters quickly set him apart from childhood friends. While they scoured the sports pages for information about University of Tennessee football recruits, young Jones was clipping articles detailing Jake Butcher’s takeover of banks across the state.

Jones’ noted ability to focus also was apparent at an early age. So engulfed in quality control of his newspaper route—“I didn’t throw my papers,” Jones says. “Mine were laid at your door facing you.”—Jones proved inattentive to school matters in the sixth grade. He was held back.

In high school, Jones evolved into a star wrestler. “In wrestling, I didn’t have anybody to rely on but me—that built character.” He routinely used the family dinner table as a forum to quiz and debate his father about business. Voted “best-looking” in his senior class, Jones was upset he hadn’t instead been named “most likely to succeed.”

Jones eventually enrolled at Middle Tennessee State University, turning down wrestling scholarship offers to pursue a business degree. But one year in, his father’s health failing, he returned to Cleveland to help run the family business.

In 1976, at the age of 24, Jones bought the company for $100,000. His dad granted him two years to pay the interest alone. In that time, Jones grew the business enough to begin making payments.

Those years were a time of worry for the Jones family. The powerful Chilton family of Dallas, whose patriarch had initiated credit reporting with his “Red Book” in 1897, was rapidly automating credit bureaus across Tennessee, putting together a powerhouse network of credit reporting files that overlaid the whole state. But the company refused to automate Jones’ business, claiming it was too small. Chilton meanwhile had automated the nearby Credit Bureau of Chattanooga, which looked to devour Jones’ Cleveland-based business.

Not yet 30, Jones flew to Dallas to meet with J.E.R. Chilton III, who politely declined to automate the business. As he left the office, a space larger than his entire operation back home, Jones says he pointed at Chilton and said, “By God, my name is Allan Jones, and you’ll remember who the hell I am.”

Jones promptly arranged a meeting with a Houston-based company he describes as “the sorriest state credit file in the country,” convincing it to automate his business. Through acquisitions and a tireless work ethic, he then proceeded to grow his father’s business into one of the largest credit reporting networks in the state. “I was a young bull,” Jones says. “A terror of the turf. All those merchant bureaus in places like Nashville were scared to death of me.”

By the time Jones sold his company’s credit files to Equifax in 1988, his database stretched across the state. Upon inking the deal, which made him instantly rich, every metropolitan credit bureau in the state came off the Chilton file and shifted to the Equifax system to take advantage of the database Jones had built. “The CFO of Chilton called and said ‘You’ve cost us the whole damn state,” Jones recounts. “J.E.R. also called to say ‘I remember you, and you’re a hell of a guy.’”

Left to concentrate solely on collections, Jones built the largest such agency in Tennessee. In 1998, in another personal financial windfall, he also sold that business. But it was the enterprise Jones discovered five years prior to that sale that would make him not just famously rich but a business pioneer in Tennessee and across America.

By 1993, Jones had collections offices across Tennessee but none in the Tri-Cities area. He’d heard about a businessman in Johnson City who had consolidated a credit bureau there and whom Jones thought would make a good employee. When he arrived to woo him, Jones found James Eaton operating out of a dilapidated service station with chipped-paint ceilings, a desk and a cash box. Upon seeing Eaton’s digs, Jones felt good about his prospects for hiring the man.

While courting Eaton, Jones kept getting interrupted by customers. With each new arrival, Jones would move to a respectful distance out of earshot and allow the transaction to take place. Each time, he says the customer left “thanking Eaton out the door.” Once each customer left, Jones stepped in to continue his job pitch. But inevitably another customer would enter, eventually thanking Eaton out the door. On and on it went, Jones says.

Finally Jones asked Eaton just what kind of business he was conducting. Cashing checks and holding them until payday to deposit, Eaton informed him, and charging a 20% fee for the service. “Why would people do that?” Jones asked. “Because,” Eaton replied, “it’s a lot cheaper than overdrafts.” It became instantly clear that Eaton was going to go to work for Jones.

Flying back to Cleveland, Jones mulled over Eaton’s formula. Formerly a board member of a publicly traded bank, Jones knew that such institutions would charge off a big percentage to overdrafts but make back three times that amount charging overdraft fees. No doubt he also was envious of the client/customer interactions. In the collections business, clients were always mad because they thought he wasn’t collecting enough money while debtors were mad because they thought he was collecting too much. By contrast, in Eaton’s business, everybody seemed delighted.

Jones had discovered his niche. He promptly went home and set up his first store in Cleveland.

Zero to Hero
Jones’ first customer was an Army recruiter whose government check was late and who needed money to buy a bicycle for his son’s birthday the next day. The recruiter wrote a check for $120 and Jones advanced him $100. The man thanked Jones out the door.

Twelve years later, Jones operates over 1,100 stores in 30 states. Check Into Cash will top 1,200 locations by the close of 2005. Jones expects to open as many as 300 new stores next year. He says the demand exists to open 1,000. (Jones recently founded a new subsidiary, Loan By Phone, offering payday advances electronically in nine states.)

The empire is nearly all his. In his own words, Jones owns “a lot more” than 90% of his company. (“There’s a single shareholder, and all my board votes are one-to-nothing. We have board meetings all the time.”) So what’s the company worth? Jones will say only that in terms of revenue, Check Into Cash would rank among the leaders in Business Tennessee magazine’s annual list of largest private companies, which places it in the billion dollar strata.

One method that can be employed to get a ballpark figure of the company’s worth is to look at publicly traded Advance America, the nation’s largest payday advance lender. With 2,500 stores and a market capitalization of approximately $1 billion, each individual store is valued at about $400,000. Jones has over 1,100 stores, meaning as a publicly traded company (which it’s not—therefore valuations would be somewhat lower) Check Into Cash could be valued at around $400 million.

Another method is to multiply the company’s earnings before interest, taxes, depreciation and amortization (EBITDA), which one source pegs at between $40 million and $50 million, by a multiple of what similar companies are currently trading for. Presently, that multiple is low, about six to seven, partly the effect of growing FDIC regulation in some states limiting the number of transactions a customer can execute annually with a payday lender. (Jones says less than 5% of his business is affected by such regulations.) That method would place the value of Jones’ company around $350 million at the top end. (About 18 months ago, Cash America offered Jones 5.5 to 6 times EBITDA for his company. He turned the offer down, citing elements of that business he didn’t like, namely pawn brokerage.)

Infested Waters
Finding his niche made Jones very wealthy. The demand for his service is evidenced by its enormous popularity with consumers. Still, there has been criticism. Many view the industry Jones spawned as modern day loan sharking. News coverage and consumer reports routinely focus on the plight of certain individuals who repeatedly pay fees on money borrowed from payday lenders without paying back the principal. They paint a picture of debtors paying 400-to-800% annual interest on small loans ($300 is the maximum) and even bouncing from one payday lending establishment to the next to cover their bills.

Often left out of such articles and consumer reports is that traditional banks simply won’t offer the kind of non-judgmental small loans Jones provides. Nor do they emphasize the risk Jones is willing to take. (“95% of the public is a good credit risk and honest,” he says. “Why spend all this time looking for the 5% that won’t pay you?”) Jones’ customers must be employed and have a checking account, so most would qualify for a traditional bank loan. They obviously prefer the convenience payday lenders offer and use the service as an alternative to pawn shops and credit cards.

According to the state Department of Financial Institutions, which licenses and regulates the payday advance industry in Tennessee, consumers last year lodged a total of eight complaints against payday-lending establishments, large and small, statewide. As Jones says, “It’s a crazy business where all your customers are extremely happy, but all the consumer groups are unhappy.”

Jones defends his industry with an analogy.

“You don’t want to go to a convenience store to do your grocery shopping.” he says, saying his average customer is a schoolteacher, policeman or nurse living paycheck to paycheck who experiences an emergency of some sort like a car repair and who doesn’t want to bounce a check. “This is a micro-lending transaction. It’s a small amount for extremely short periods of time.

Jones’ efforts to improve the industry offer more proof he’s not the heartless moneychanger some would like to portray him to be. He spearheaded formation of the national trade association that monitors the payday advance industry, setting up best practices that have ferreted out many of the industry’s less scrupulous players. In Cleveland, he sponsored the creation of a community-based credit union, essentially a competitor to his business, specifically to assist economically challenged residents trying to build a credit history.

To the Victor Go the Spoils

Advance America CEO Billy Webster, Jones’ chief industry competitor, says he has “great respect” for Jones both as a businessman and as a person.

“Allan’s judgment about human nature and the way real people live is impeccable,” Webster says. “He’s a street sensible guy. And while he gets a lot of grief from time to time regarding general industry issues we all confront trying to improve the way this industry works, the reality is that there is no more generous, community-minded person that I know than Allan Jones. Cleveland, Tenn., is the center of the universe for Allan Jones.”

Jones says he didn’t take a dime out of his Check Into Cash business from 1993 to 1998. It’s clear he has been taking distributions from the company since. The bulk of his cash flow has been invested in numerous other profitable businesses under the Jones Management umbrella. And many of those directly benefit the 30,000-person Cleveland community.

Through Jones Properties, a residential and commercial real estate division, Jones owns dozens of properties throughout Bradley County, including hundreds of acres, numerous apartments, office buildings, houses and a chunk of downtown Cleveland. One such downtown property is the renovated Craigmiles Opera House, built in the late 1800s and once the venue for a concert performance by John Philip Sousa. (Jones’ interest in preserving historic structures extends to Nashville, where he has donated considerably to the ongoing $11 million renovation of the Governor’s Mansion.)

Jones also owns Cleveland’s first shopping mall, the Village Green Town Center, a nearly 20-acre downtown site he purchased out of bankruptcy in 1998 and renovated into a high tech business plaza. Village Green is the national headquarters for Check into Cash, which employs several hundred people. His restaurant, the Bald Headed Bistro, is also there, a welcomed addition to Cleveland’s dining community inspired by Jones’ travels in the American West. The interior décor consists of 283 exposed logs from trees downed during a 2000 fire on the Crescent H Ranch in Jackson Hole, Wyo., a property Jones owns (see Jones’ profile in this issue’s “Rich List,” pg. 47) The fossil stone inlaid in the floors, walls and bar dates to the Eocene Period, 55 million years ago, when Wyoming was under the sea.

A wrestling enthusiast, Jones donated $1 million to his alma mater, Cleveland High School, for the construction of a wrestling center that rivals many college facilities. (Jones also donated $4 million to the University of Tennessee for the construction of a new aquatic center slated to be one of the finest swimming and diving centers in the United States.)

For many years, Jones hosted a Halloween event in Cleveland that attracted over 11,000 trick-or-treaters.

Jones also is responsible for planting the trees that dot Cleveland’s downtown streets. Doing so has returned an element of the charm and appeal Jones associates with the place in which he grew up. He also donated trees grafted from what is believed to be the last living tree planted by John Chapman (“Johnny Appleseed”) in the 1800s to each school in the city.

Most recently, Jones purchased The Spot restaurant downtown, a longtime landmark in Cleveland that could have disappeared forever without his intervention. State Rep. Dewayne Bunch, a fellow wrestling enthusiast who has known Jones for 30 years, uses that recent development as a case in point of Jones’ dedication to Cleveland. “Everything has risen market-wise because of his investments,” Bunch says. “He has a passion for Cleveland. He attributes his success to Cleveland.”

Success, indeed. Conservatively speaking, Allan Jones is worth $500 million. And that’s new money. Given the likelihood of the continued growth of his company, and the possibility of improved conditions for market valuations in the future, Jones’ wealth could experience the greatest percentage up-tick of any Tennessean in the coming years.

Note to Forbes: His name is Allan Jones. Remember who the hell he is.