Webster and his father sold their holdings back to Bojangles; the pair were operating two dozen stores generating a combined $24 million in annual sales. By almost any standard, though not his own, Billy Webster was a rich man.
For a time Webster got into politics. Again his father proved the catalyst. He had grown up with Dick Riley, who would serve two terms as South Carolina’s governor (the elder Webster had served as chairman of Riley’s first political campaign). Riley introduced Billy Webster to Bill Clinton, and when the new president appointed Riley to serve as education secretary, Riley brought Webster to Washington to serve as his chief of staff. Webster resigned after two years, intent on returning to the private sector, but then Clinton invited him for a run around the Mall. My scheduling office is a mess, the president told him, and I think you’re the man to help me straighten it out. So Webster spent one more year in Washington before returning to South Carolina to figure out what he would do next.
“I’m not an engineer,” Webster told himself. “I’m not a software guy.” It was the mid-1990s but starting a technology company was out. This man who had made his money selling fried chicken and washing other people’s clothes reminded himself to keep it simple. He thought of his father’s friend, George Dean Johnson, Jr. He had gotten into the garbage collection business before selling it to Waste Management and then jumped into the video rentals market, opening more than two hundred Blockbuster stores before selling them back to the parent company for $156 million. The key was to find a field before it came under the control of its Blockbuster or Home Depot and then aggressively attack it with money, MBAs, and an all-or-nothing aggressiveness.
Webster went to visit Johnson, who by that time had moved back home to Spartanburg. Johnson, who had served three terms in the South Carolina legislature when he was younger (the first as a Democrat, the second as a Republican, the third as a declared Independent), was already on to his next business, Extended Stay Hotels, but he told Webster he would be happy to provide him with financial backing. You find a business that you think you can run, he told him, and I’ll take care of the money.
Webster mulled a return to the food business. He contemplated starting an automotive supplies company and thought about creating a competitor to the Sylvan Learning centers. Sometimes he would drive around town looking for businesses that had lines of people wanting to buy what they were selling. The idea for getting into the payday lending business came when George Johnson suggested Webster go talk to someone at Stephens, Inc., a boutique investment bank based in Little Rock, Arkansas, that had staked out the “specialty finance” sector as its own. There Webster spoke to a junior banker gung-ho about the moneymaking potential of the cash advance business. It was Jerry Robinson, who had moved to Tennessee to help Toby McKenzie take his rent-to-own company public but ended up helping him get into payday loans. We have a relationship with one of the industry’s top players, Robinson told Webster. He’d be happy to make the introductions.
Webster didn’t know what to think about payday when he first heard about the idea in 1996. He was intrigued, though, so he flew to Tennessee to spend the day parked outside one of McKenzie’s stores. He was struck by the sheer number of people visiting this one small outpost on the outskirts of Cleveland and asked Robinson to approach McKenzie about letting him see the operations from the inside. If that first trip to Tennessee left him eager to learn more, then the three weeks Webster worked the counter at a National Cash Advance storefront convinced him he had found what he was searching for. “I didn’t see an unhappy human being in my three weeks working there,” Webster said.
Back home Webster worked the phone. There were budding chains of 100 or 200 stores, he discovered, “but there was no dominant national player who could leverage efficiencies over hundreds and hundreds, if not thousands and thousands of operating units.” Those who had arrived before him in these low-rent credit fields hardly struck him as invincible. Jones and McKenzie, from what he could tell, were payday’s “Hatfields and McCoys,” two men with high school degrees building their businesses with one eye on the other and by the seats of their pants. In Cincinnati, the Davis brothers, with access to their father’s connections and his millions, could prove a more formidable team but already Webster was picking up reports of strife inside the family. “It didn’t take too much to figure out everyone was distracted,” said Webster, who then dryly added that “distracted” is “an understatement.” The opportunity seemed that much more bright given the sorry state of the typical payday outlet—“storefronts with a hole cut in the wall,” he said.
It didn’t take much effort for Webster to sell George Johnson on the idea, nothing more than two lines on a piece of paper. One line was the cost of a payday loan and the other depicted the rising costs of a bounced check or credit card late fee. “When those lines crossed,” Webster explained for Johnson, when the penalties a bank charged started costing more than these short-term quick loans, “the industry just grew and grew and grew.” Both put up money (Johnson invested the lion’s share) to start a company they called Advance America. Using their connections, the pair secured sizable lines of credit at Wells Fargo, Wachovia, and NationsBank. “We basically borrowed forty or fifty million dollars before we made anything,” Webster said. “We had an infrastructure for five hundred stores before we had even one.”
Advance America opened 300 stores in 1997 and then opened another 400 the next year. In 1999, Webster started calling competitors to see who might be interested in selling. Jones turned him down, LBJ-style, while soaking naked in a tub in a summer home he owned outside Cleveland, but McKenzie jumped at the chance, selling to Advance America for $150 million. Advance America opened 300 more stores in 1999 on top of the 450 or so they had bought from McKenzie. By the start of 2000, Advance America was operating more than 1,400 stores, including 250 in California, 150 in Florida, and another 120 in Ohio, each looking identical.
In the early days, payday could sometimes seem like something out of a Quentin Tarantino film rather than a burgeoning industry. Those touting the business had been excited when the
“You don’t normally want competition,” Jared Davis said, “but in this case, we think Billy’s been a big help to the industry. From a lobbying perspective. From a legitimacy perspective.”
For a year or two it was enough for Advance America to build in states where others had gone before them but a company that ambitious could play fill-in for only so long. Before the end of that first year Webster was already staffing up a government affairs office. “There was always an overt business objective—to broaden the geography,” Webster said. In 1998, South Carolina legislators welcomed payday lenders into their state, as did elected officials in Mississippi, Nevada, and the District of Columbia. By the end of 2000, twenty-three states had legalized payday lending, and the likes of Advance America and Check Into Cash were operating in eight more because there was no law specifically forbidding them from doing so. Where a traditional lender was earning a return on investment of between 13 and 18 percent, Jerry Robinson, the investment banker who had worked for Toby McKenzie before taking a job with Stephens, Inc., told Business Week that the average payday lender was earning an average return of 23.8 percent.
At first reporters scratched their heads over this odd new business. “I don’t know how someone who just does payday advance is going to make it,” a local check casher told a reporter with the
But quickly a new story line emerged: the payday client who had gotten him or herself into deep financial trouble availing themselves of a product pitched as requiring no credit check. Reporters never seemed to have much trouble finding unhappy customers. Readers of the
