Small Investment Blossoms Into Flower Business

John F. Davis III and James Poage were looking for a side investment several years ago when they put $25,000 into a venture whose assets amounted to little more than a catchy telephone number.

That investment has blossomed into 800-Flowers Inc., which takes its name from the telephone number that customers can call to have flowers delivered anywhere in the nation.

“It was one of those things that was a side investment,” said Davis, vice president of marketing at 800-Flowers. “We never dreamed it would get this big.”

Davis and Poage, then oil entrepreneurs, said they looked at the $3.5-billion floral delivery industry and decided it was a fertile area.

“Today’s flower business is disorganized and fragmented, with great variability in quality and service,” Poage said.

800-Flowers began operations in October after Davis and Poage put together $18 million in investors’ money.

Davis said the company is setting up a network of 6,000 florists that will be monitored by the company’s 16 field representatives.

“When you call a (local) florist (for a delivery in another city), he picks out someone through a directory. There is no personal service,” he said. “There are 44,000 florists in the U.S. We’ve picked the top.”

FTD, the giant in the floral delivery business, welcomes the competition, said spokeswoman Judy Yovanovich at the organization’s headquarters in Southfield, Mich.

“In general, we think competition is good for the flower business,” Yovanovich said.

FTD, which is a cooperative with 21,000 members worldwide, had sales of nearly $500 million in the fiscal year that ended June 30, up 13.5% over the previous year.

Automatic Deliveries

800-Flowers’ service includes a “forget me not” plan that provides automatic deliveries on special occasions, like anniversaries, Davis said.

“You can call us up one time, give us the dates and we put them in the computer,” he said. “You’re covered. You can’t ever mess up again.”

Unlike the major wire services, 800-Flowers is not focusing on out-of-town orders.

Davis said the new company also will aim at the even more lucrative intracity business, which he estimates at $2.5 billion a year.

He said 800-Flowers hopes to make the telephone fill the same niche in American life as the street-corner flower vendors do in European life.

“Europeans spend almost five times as much as Americans do on flowers. You walk down the street and you can pick up flowers and take them home,” Davis said. “But Americans live in their cars. You can’t do that here.”

Davis and Poage, both 32, first heard of 800-Flowers in 1982, when it was a struggling new business, barely more than an idea.

“We were brought in as investors with a majority interest in the company,” Davis said. “Our initial investment was $25,000.”

For almost two years, 800-Flowers was just a little “flyer” for the pair. Their main concern was Mid-South Drilling, an oil and gas exploration company.

The company also was bogged down in a trademark infringement lawsuit with a florist in Wisconsin who had claimed rights to 800-Flowers but had not acquired the phone number.

The two sides settled out of court last March. Davis declined to discuss terms of the settlement.

Davis and Poage said they then raised $10 million in a few weeks through a limited partnership with 23 investors and themselves as general partners.

Davis said the total investment in 800-Flowers is now $18 million, which went for a pair of computers, telemarketing equipment and a lease on a new building in suburban Irving. Two-thirds of the money is being pumped into advertising.

Began Advertising

The company began advertising in Chicago on Oct. 1, and has been slowly adding cities since.

“We’re rolling out on a controlled basis to make sure we can handle the business,” Davis said.

At present, the budding business has 125 order-takers capable of handling 30,000 calls a day. Eventually 800-Flowers hopes to advertise nationally and employ 600 people to take telephone orders.

Yovanovich of FTD said the flower business is blooming these days.

“People are becoming more interested in buying flowers for everyday use,” she said. “A lot is because of a change in life styles.

Yovanovich said the growth in the flower business stems in part from changing life styles.

“A lot more people live in apartments and condominiums where they don’t have outdoors, backyard nature,” she said. “There is also a trend toward more home entertaining, which means a new need for flowers.”