J.H. Reid Corporation Business Overview Business Description J. H. Reid Corporation (JHR) is an early stage venture, having had less than $1,000 in sales during a 1996 market test. J. H. Reid Corporation is an Illinois Sub-Chapter S Corporation. The company is named after Walter Albecker's grandfather. The primary activity of the business is the manufacturing and marketing of a chair called The Chicago Lounge™. Stage of Development J. H. Reid Corporation has acquired the machinery and equipment necessary to begin small-scale production of The Chicago Lounge™, and a prototype manufacturing space has been set up. Key suppliers have been contacted and favorable pricing has been negotiated. The product line has been developed with production prototypes for chairs now complete, including innovative upholstery and cushion systems. Other products, such as work surfaces for use with laptop computers, are in development. Marketing materials have been developed, including the corporate identity package, the logo for The Chicago Lounge™, a promotional brochure, and an order form. The product has been favorably reviewed by the product design manager at Herman Miller Inc., a leading office furniture manufacturing firm with an international reputation for design, a chiropractor, a physical therapist, a top interior designer from a leading furniture dealer in Chicago, a franchisee with one of the targeted retailers, and a number of individuals, including many from other countries. Corporate Mission It is J. H. Reid Corporation's mission to be a profitable world class manufacturer of innovative chairs, and to provide opportunities for profitable work for inner city residents. JHR intends to make and market The Chicago Lounge™, and to position all of its products as high quality, innovative, and a good value. Distinctive Competence The Chicago Lounge™ is probably the best chair for watching television. None of the major furniture manufacturers have developed a chair with the functional benefits of The Chicago Lounge™. With five US Patents, JHR has the exclusive right to make and market these products. JHR is in an excellent position to launch The Chicago Lounge™ because of a highly qualified start-up team. This strong team enables JHR to have top people helping in the critical start-up phase, without adding the long-term expense of salaried employees. For long term, JHR has a Board of Advisors with a depth of abilities and experience to give insights and perspective as the company grows The production facility will set up in an economically depressed inner city community, which has advantages related to lower labor wage rates, lower real estate costs, and tax credits. Some of these advantages will likely be offset by higher insurance costs, and an available labor force with many lacking in good work experience. Mr. Albecker has extensive experience working in this environment both as a general contractor and with ServiceMaster. Taking into account both the advantages and disadvantages of locating in the inner city, there will be a net advantage to JHR to locate in such a community. Mr. Albecker believes that combining the compassion of the "Good Samaritan" (who helped someone from a different culture), street smarts, and good business principles will result in a vibrant inner city business for JHR. Harvard Business School Professor Michael E. Porter has identified a number of advantages to a business that locates in the inner city, such as a loyal long-term workforce.1 The initiative for a Competitive Inner City and Inc. magazine are now profiling the "Inner City 100" to show companies that have succeeded in the inner City2. Short Term Goals JHR will begin operations in the second quarter of 1999. The first year sales goal is to sell 5,000 units for total revenues of about $1,020,000. Achievements to Date During recent years, Mr. Albecker has invested his available time to developing a chair (called The Chicago Lounge™) and cushions for chairs. Five patents have been obtained (see attachment A-2), and additional patents are pending. A licensing agreement has been reached between Mr. Albecker and JHR to give the company exclusive rights to manufacture and market The Chicago Lounge™. The agreement provides for giving Mr. Albecker a royalty on each product sold. JHR will engage in manufacturing and marketing the chair. In a 1996 market test, JHR sold chairs at an arts & crafts show in Chicago. Since 1996, Mr. Albecker redesigned some components of the chair to make the chairs easier to manufacture. Customers who purchased these chairs were contacted in April 1999. These first customers reported that they liked the chairs and used them frequently. The product has been developed to a stage that it is economically feasible to make at least three different models -two adjustable and one fixed. Manufacturing processes have been developed, suppliers for many of the key components have been found, and favorable prices have been obtained. 1 "The Advantages of the Inner City", Inc., May 16, 1995 p. 104-119 2 "The Inner City 100", Inc., October 1998, p. 57