West Coast Video, the nation's second-largest chain of video rental stores, has closed some of its company-run locations -- including two in Baltimore -- and is attempting to sell the rest of the company stores to franchise holders.
West Coast officials say the move is being made so that the company, with headquarters in Philadelphia, can devote more time to providing service to its 585 franchises nationwide. Fifteen company stores are being closed around the country, with another 45 being offered for sale.
But an industry analyst suggested that West Coast Video may be reeling from the rapid expansion of its larger competitor, Blockbuster Video, and is selling its company stores to acquire much-needed cash.
Andrew L. Beja, of the Advest Group in Connecticut, says West Coast Video's move may be a "last-ditch effort" to generate cash in the face of moves by the more formidable Blockbuster.
This year, Blockbuster agreed to purchase all 209 stores from the Erol's video chain of Springfield, Va., for $40 million, making Blockbuster one of the fastest growing chains in the country. In 1990, the Fort Lauderdale, Fla., company nearly doubled the number of its stores, from 862 to 1,545. Meanwhile, revenues increased by 88 percent to $1.25 billion.
Richard Silva, West Coast vice president of operations, says company policy prohibits his releasing the privately held chain's earnings for last year. But Silva denies that West Coast's decision to sell its company stores was a response to Blockbuster's growth.
Silva says the company's new strategy was launched in January, after analysts concluded that "an exorbitant amount of time was spent servicing" company stores, which made up only 10 percent of all West Coast Video locations.
"If you've got a retail system that is 50 percent company owned and 50 percent franchise, that's OK," says Silva. "But if it's way out of ratio to one degree or the other, basic management can't be allocated effectively."
The two company stores in Baltimore, which closed last month, were in the 1400 block of W. Patapsco Ave. and the 1700 block of Pennsylvania Ave. The stores were closed because of poor profits, Silva says.
While there are no other company stores in the Baltimore area, there are 13 West Coast Videos held by franchise holders. Silva says none of the franchise stores is projected to close.
Silva says West Coast Video is positioning itself in various ways to deal more effectively with all its competitors.
With stores that are generally smaller and carry less stock than Blockbuster, West Coast is in the process of refitting existing stores or assisting franchise holders in moving to larger locations, Silva says. About 50 percent of the chain's stores have undergone upgrading, he says.
Silva says that many of the Blockbuster stores were upgraded four to five years ago.
"Some of our newer stores have a little more glitz, a little more Hollywood" than Blockbuster, he says.