The Franklin Mint
Address:
U.S. Route 1
Franklin Center, Pennsylvania 19091
U.S.A.
Telephone: (610) 459-6000
Fax: (610) 459-6880
http://www.franklinmint.com
Statistics:
Wholly Owned Subsidiary of Roll International Corporation
Incorporated: 1964 as General Numismatics Corporation
NAIC: 327112 Vitreous China, Fine Earthenware and Other Pottery Product Manufacturing; 339911 Jewelry (Including Precious Metal) Manufacturing; 339914 Costume Jewelry and Novelty Manufacturing
Company Perspectives:
Sharing your passion for collecting.
Key Dates:
1964: Joseph Segel establishes General Numismatics Corporation to mint coins for the National Commemorative Society.
1965: General Numismatics is renamed Franklin Mint and taken public.
1973: Segel retires.
1980: Warner Communications acquires the company.
1985: Lynda and Stewart Resnick acquire the company.
1992: Efforts to complete a stock offering fail.
1998: The company is sued by the Princess Diana Memorial Fund.
2004: A major restructuring effort begins.
Company History:
The Franklin Mint is a subsidiary of Roll International Corporation, owned by Stewart and Lynda Resnick, and based in Franklin Center, Pennsylvania, a Philadelphia suburb. Although it portrays itself as a company devoted to producing quality one-of-a-kind art objects, to many The Franklin Mint is little more than a mass purveyor of kitsch. Nevertheless, the company is a pioneer of the collectibles industry, starting with coins, which the company minted itself, and branching out to include such items as limited edition paintings and books, commemorative plates, figurines, celebrity likeness dolls, jewelry, seasonal giftware, and die-cast model airplanes and automobiles. But as the collectibles industry has faltered with the rise of the Internet and the emergence of Ebay, The Franklin Mint has steadily lost business, forcing a major restructuring. The company now concentrates on its die-cast automobile and airplane models and Harley-Davidson motorcycle branded items, although it continues to offer dolls, jewelry, and a variety of gift items.
Company Founder: 1940s Whiz Kid Entrepreneur
The Franklin Mint was founded by Joseph M. Segel, a legendary entrepreneur, who launched a number of businesses in his career, including the QVC television shopping channel. He was born in Philadelphia, Pennsylvania, in 1931. When he was 13 he started a printing business and in 1947, at the age of 16, he entered the University of Pennsylvania's Wharton School of Business to major in accounting. As an underaged graduate student he also taught marketing classes at Wharton, while earning money on the side by selling promotional items, such as postcards with messages written in invisible ink. The recipient had to dip the card in water in order to reveal the message. It was a brilliant marketing gimmick, inducing the target to invest time by creating a desire to read the promotion. Because it was difficult to find a company to make the postcards, Segel compiled a list of suppliers as well as promotional products. In 1950 he published the Advertising Specialty Directory and launched a company he called the Advertising Specialty Institute. He ran the business until selling it in the early 1960s.
Segel's inspiration for creating The Franklin Mint was the result of the cross-pollination of two events. On March 25, 1964, the U.S. Treasury ceased to sell silver dollars, a decision that led to long lines of people at the Treasury building eager to buy the remaining silver dollars, and packs of photographers taking pictures of them for the newspapers and magazines, including Time, which published a photograph that caught Segel's attention. He was already very much aware that as silver coins became scarce there was a growing number of people interested in collecting them. He sensed a business opportunity, which would come to fruition after another event took place that received widespread media attention that year: the funeral of General Douglas MacArthur. As Segel explained to Direct Marketing in 1988, "My idea was to issue a series of solid sterling silver medals, a little larger than the silver dollar, of the highest quality of limited edition and each designed by a different famous sculptor." The first coin was to commemorate General MacArthur.
In 1964, with an investment of $10,000, Segel formed the National Commemorative Society to issue the medals, which would be numbered and sold only to members. The die would then be destroyed to ensure exclusivity. The Society also would publish a monthly newsletter to promote new offerings and provide a historical perspective on the pieces. Members would vote monthly to determine the people or events to commemorate. Once again Segel displayed his marketing acumen in attracting members. He ran an ad simultaneously in several coin magazines to announce the formation of the society, which would sell memberships for just eight weeks. To heighten the sense of urgency, Segel added a sliding scale for membership fees: early birds paid just $10 during the first two weeks, while latecomers were charged $40 during the final two weeks. He hoped to sign up 1,000, maybe 2,000 members, but far surpassed his own expectations. After eight weeks the Society signed up 5,250 members.
Starting a Private Mint in the Mid-1960s
Segel sold his initial "coins" for $6.50, and although the Society members were satisfied with the quality, he was far from pleased. He had promised to produce proof-quality coins, but such coins featured a reflective background and a satin or frosted finish on the area in relief. Even the U.S. mint had difficulty in striking such quality coins, making them a rarity that collectors call a "gem proof" or "frosted proof." To complicate the matter, Segel wanted to strike larger coins, the size of a British crown, but they required stronger dies to withstand the required pressure. Unfortunately, tougher dies led to reduced surface quality. Segel tried two different companies, but neither could meet his high standards. That is when he decided to start his own private mint. He approached Gilroy Roberts, the chief sculptor-engraver of the U.S. Mint, who was about to retire, and convinced him to join him in the venture. Roberts agreed, and in late 1964 they established General Numismatics Corporation, with Segel serving as president and Roberts as chairman. Roberts soon solved the problem in producing large proof-quality coins by employing different alloys in the die. The business changed its name to The Franklin Mint in 1965, and what started with a $10,000 investment now earned $10,000 in profits each month. Segel took The Franklin Mint public in 1965 and completed a $4 million initial offering of stock. Although scoffed at in the beginning, the private mint soon had experts from around the world paying visits to learn how it produced such quality proofs.
In addition to striking coins for the National Commemorative Society, The Franklin Mint began doing work for foreign countries, such as the Bahamas, Jamaica, Trinidad, Panama, and Tunisia. It also added other collector items. The Franklin Mint produced aluminum coins bearing the likenesses of U.S. presidents (which were given away at gas stations as a sales incentive), Christmas plates, commemorative ingots, and fine art plaques. Business was so strong that sales grew from $392,000 in 1965 to $45.8 million in 1970. But the collectibles industry was just beginning to take off, as an increasing number of items were now being produced simply to be collected, and The Franklin Mint was at the forefront. In 1973 The Franklin Mint posted sales of nearly $113 million and a net profit of more than $9 million. However, the company would have to continue on without its founder, because in 1973 Segel stepped away from the business, as would be the case with so many of the companies he started. He told Direct Marketing in 1988, "I may have a short span of attention, but the businesses I create tend to have a long life." Over the next 20 years he started eight more companies, including the QVC television shopping channel.
Segel left The Franklin Mint in the experienced hands of Charles Lovett Andes, another native Philadelphian, whom Segel hired as the company's president in 1969. He would become chief executive officer and chairman of the board, titles he held until 1985. Under his leadership, The Franklin Mint continued to expand its offerings of collectibles. The company's first gold coins were struck in 1974. The Franklin Mint also began offering items such as paintings, leatherbound books, records, etched crystal, porcelain, historic arms, and chess sets. In addition, he acquired Eastern Mountain Sports Inc., not only picking up a sports equipment and clothing retail chain, but a mail-order operation as well. By the end of the 1970s Franklin Mint sales grew to $360 million. But success did not come without missteps or controversy. The company's claims that its silver coins were a solid investment were contradicted by Forbes, and the story was picked up by CBS's 60 Minutes. The Franklin Mint saw its earnings tail off in the late 1970s and also had to contend with a stockholder's lawsuit. Andes responded by cutting back on the company's original commemorative coin business and adding other collectibles, such as furniture, jewelry, and figurines. The company also looked to move beyond direct marketing and began opening retail shops.
In 1980 The Franklin Mint generated sales of $360 million and net income of $21.8 million. At the close of the year, Andes arranged a sale of the company to Warner Communications Inc. for about $225 million in cash, stock, and warrants. By becoming part of Warner, The Franklin Mint gained the deep pockets of a corporate parent that Andes hoped would fuel future growth. Warner, on the other hand, bolstered its consumer products division. The arrangement was short-lived, however. The Franklin Mint added its Precision Models unit, which produced a popular line of miniature cars, but after two years under Warner ownership Franklin Mint experienced a drop in sales. Moreover, Warner had money problems of its own. It owned video game company Atari, and when its market collapsed in the early 1980s, the price of Warner's stock fell, making it susceptible to a hostile takeover. The company suffered massive losses and was forced into a restructuring program, which resulted in Warner selling off Atari in 1984. Late in that year The Franklin Mint also was put on the block and a buyer was found in the form of American Protection Industries Inc. (API), which completed the $167.5 million purchase in 1985, at which point Andes left the company. Warner retained a 15 percent stake in Franklin Mint and elected to keep Eastern Mountain Sports as well as The Franklin Mint center, which it would lease back to API.
Based in Los Angeles, API was owned by Stewart A. and Lynda Rae Resnick. It was a holding company for a central-station alarm company, Teleflora Inc. (a flowers-by-wire service that the Resnicks acquired in 1979), and three agricultural subsidiaries. When they took over The Franklin Mint, the company's annual sales had dipped to $250 million. The Resnicks took steps to revitalize the business, which was then divided among four major product groups: jewelry, porcelain dolls, tableware, and the male division, which produced miniature cars and items such as a Civil War chess set. The company also changed its marketing approach somewhat, putting more money into television.
The Franklin Mint showed some initial improvement, growing net income to $22.5 million in 1987, but the following three years brought losses. The company returned to profitability in 1991, and a year later it filed to make a public offering of stock at $16 a share, in the hope of raising about $180 million for the Resnicks and the company. A large share of the money was earmarked to pay down debt. But the response on Wall Street was cool and the offering was soon withdrawn.
Overall, the 1990s brought mixed results for The Franklin Mint. The company continued to bring out distinctive collectibles. For example, Lynda Resnick bought the faux pearl necklace owned by Jackie Onassis, estimated to be worth $700, for $211,500, and then had Franklin Mint make thousands of replicas. Costume jewelry in general was a strong product category for the company during this period, as overall sales grew to more than $700 million. But the company also received unwanted notoriety in 1998 when the Diana, Princess of Wales, Memorial Fund sued Franklin Mint in California to stop it from producing items bearing her image. The doll in question showed the late princess dressed in the outfit she wore during her campaign in Angola to ban landmines. Franklin Mint had been selling Diana dolls since the late 1980s without comment by the royal family, but it now became the focal point of the Memorial Fund's efforts to see that the proceeds from any items bearing her likeness went to charitable causes. The Franklin Mint was vilified openly by Fund officials, who called the Resnicks "vultures feeding on the dead." The matter was dismissed by a district court, which held that Diana had to have been born in California in order for her representatives to hold rights over her image in that state. The Memorial Fund appealed the case, and the Resnicks countersued for $25 million, claiming that the Fund and executors of the estate had acted "maliciously, wantonly ... and with the intent to oppress" Franklin Mint. In 2002 the U.S. Court of Appeals for the 9th Circuit upheld the lower court ruling, and in November 2004 the Memorial Fund and The Franklin Mint reached an out-of-court settlement just before jury selection on the suit filed by Franklin Mint. Neither the company nor the Resnicks received any money. Rather, the Fund pledged to spend $25 million over the next five years on jointly agreed-upon charitable causes, such as HIV-Aids, landmines, and caring for the terminally ill. It was clearly a face-saving arrangement for both sides, who after six years of bitter discord were ready to let the matter rest.
Sales Peak in the 1990s
During the years the Resnicks and The Franklin Mint were involved in litigation, they saw a change in the collectibles industry. The market peaked in 1998 with sales of $10 billion, but the bottom soon fell out as sales plummeted to $6.5 million by 2001. Part of the reason for this collapse was generational, as fewer young people were interested in collecting limited edition items but some of it was inherent in the nature of the collectibles industry itself. Because the items were made to be collected, people held onto them, often believing that they would increase in value. But rising prices had been based on scarcity and although the collectibles were limited in edition they were still mass produced. People who thought they were making an investment quickly learned that anyone who would want the item most likely already owned one. Scarcity was delivered a further blow by the emergence of the Internet and the Ebay online auction site in particular. The sense of urgency that Joe Segel played on when he first started Franklin Mint, the need to buy an item if you stumbled upon it at a garage sale or antique shop, was gone. Every day dozens of that special something were put up for bid on Ebay, including thousands of Franklin Mint items, once highly prized but now available at a steep discount. Virtually every kind of collectible and antique dropped in value, not only the kind of collectibles in which Franklin Mint specialized. The entire dynamic of the industry changed, so that people who counted on the prices found in collectible guides were sorely disappointed when they sold their collections, often receiving just a fraction of what they invested. Thus, virtually overnight, countless collectibles had turned into mere dustables.
The Franklin Mint also made strategic errors along the way. As reported by Catalog Age in a 2004 article, "According to one anonymous source, Franklin Mint spent too much money on acquiring customers via space ads. And when the company started ramping up its catalog business in the mid-'90s, it discovered that the buyers of less-expensive collectibles didn't always convert into repeat buyers of higher-end gifts. 'The plan was to sell consumers a commemorative plate for $19.95, then get them to buy a $195 sculpture of Marilyn Monroe or Jackie Onassis,' the source says, 'It just never worked.'" Clearly, some major retooling of the business model was in order. In 2004 the company drastically cut back on its catalog mailings, closed its 30 retail stores and its museum in Franklin Center, and laid off some 200 employees. The downsizing also extended to the company's product offerings, as Franklin Mint decided to focus on its miniature airplanes and cars and Harley-Davidson branded items. Hence, the long-term health of The Franklin Mint, and the collectibles industry that it spawned, was very much in doubt.
Principal Competitors: The Boyds Collection, Ltd.; The Bradford Group; Lenox, Incorporated; Enesco Group, Inc.; Russ Berrie and Company, Inc.
Further Reading:
- Eckstein, Sandra, "Bear Market Collectibles," Atlanta Journal-Constitution, August 7, 2002, p. E1.
- "The Franklin Mint," Nation's Business, December 1971, p. 74.
- Halford, Quinn, "Collectibles at a Crossroads," Gifts & Decorative Accessories, February 2004, p. 16.
- Hazelton, Lynette, "More of the Same Bolsters Franklin Mint Marketing," Philadelphia Business Journal, April 7, 1986, p. 20.
- Jardine, Cassandra, "No One's Going to Make a Mint Now," Daily Telegraph (London, England), November 9, 2004, p. 16.
- Lubove, Seth, "King of the Startups," Forbes, November 8, 1993, p. 186.
Source: International Directory of Company Histories, Vol.69. St. James Press, 2005.
