National Educational Music Co. Ltd.

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National Educational Music Co. Ltd.

1181 Route 22
Mountainside, New Jersey 07092-22807
U.S.A.
Telephone: (908) 232-6700
Toll Free: (800) 526-4593
Web site: http://www.nemc.com

Private Company
Incorporated: 1957 as New Jersey Educational Music Company
Employees: 75
Sales: $20 million (2001 est.)
NAIC: 532299 All Other Consumer Goods Rental

Located in Mountainside, New Jersey, National Educational Music Co. Ltd. (NEMC) is dedicated to providing musical instruments to schoolchildren. NEMC operates the only national franchised licensed band and orchestra instrument rental program in the United States, enabling local music stores to offer a high-quality rental program without the heavy burden of capital investment. NEMC affiliates, located in 46 states, pay a one-time lifetime franchise fee (or in some cases no fee at all), and in return receive an inventory of brand name instruments, which are either new or in “like-new” condition. To maintain a like-new level of quality, all returned instruments are completely refurbished and cleaned in a proprietary process by a staff of 45 repairmen. Should a franchised dealer already own an inventory of rental instruments, NEMC buys the stock at 100 cents on the dollar. NEMC also customizes rental documents for affiliates according to state regulations. Affiliates promote the rental program in their territory, aided by NEMC printed materials, and obtain the customer’s initial payment. At that point, NEMC takes over the monthly billing, accounting, sales tax remittance, and collection on delinquent accounts.

Because NEMC’s rental program is a true franchise operation, it complies with FTC regulations, which ensure that a dealer’s territory is protected. Depending on rental volume, affiliates earn a commission that ranges from 19.5 percent to as high as 40 percent. Not only are parents assured that their children are receiving the highest quality of rental instruments from NEMC, they have the ability to cancel their contract at any time without further obligation, and if they reach the end of the rental agreement will own the instrument outright. NEMC also sells all band and orchestra instruments, including high-ticket items such as tubas and cellos, to organizations and individuals through a catalog, using its size to obtain the maximum discount from manufacturers and passing on some of the savings to its customers. NEMC also takes advantage of manufacturers’ discounts when bidding on school instrument contracts. Aimed at schools and other organizations strapped by tight budgets, NEMC offers its Multi-Brand Lease Program, which allows the groups to fill all their musical needs on a lease-to-own basis. In addition, NEMC is involved in a limited amount of export sales.

Instrument Rental During the 1950s

NEMC’s founder and president, Raymond Benedetto, grew up in New Jersey in the 1930s, playing the trumpet and idolizing the great trumpet players of the era’s most popular big bands. As a high school student he began playing trumpet in 15-piece bands that played in local clubs. He continued to play professionally while studying music at Montclair State University. After earning a teaching degree in 1952, he went to work at a New Jersey public school, where for the next two years he served as a music director. His musical career was limited mostly to weekends and summers. He played in a swing band as well as house show bands that accompanied well-known singers who appeared in clubs in New Jersey, New York City, and the popular upstate New York resorts of the Catskills. During the Mambo craze, Benedetto took up the flute as a second instrument and joined a band playing Latin music that had an extended stay at a major New York City nightclub, the Queens Boulevard. Because the inflexibility of a school schedule prevented him from traveling to out-of-town engagements, he quit his teaching job. Although he played at the Queens Boulevard six nights a week, Benedetto felt restless during the days and decided to take a job at a large music store, Dorn and Kirschner, located in Newark, New Jersey, close to where he was living at the time. Taking advantage of his experience in the New Jersey public school system, he became the store’s educational director, a position that put him in charge of renting musical instruments. The instrument rental business developed during the 1920s and 1930s and revolved around a rent-to-own concept akin to the installment plan made popular by the automobile industry and subsequently applied to furniture, home appliances, and other consumer goods. Dorn and Kirschner boasted one of the area’s largest instrument rental programs, serving a sizeable section of central and northern New Jersey.

At first Benedetto took advantage of the flexibility that Dorn and Kirschner allowed in his schedule to play occasional out-of-town engagements, but as he became more fully committed to his position at the store he gradually cut back on his performing career. He soon began to entertain ideas of expanding the store’s rental business, which evolved into a dream of one day creating a national instrument rental program. He approached the owners of the store with some of his thoughts but received a cool reception. The owners were second generation and quite content to continue doing business in the same way as their parents had. Feeling that he had reached a dead-end at Dorn and Kirschner, Benedetto decided to quit and strike out on his own.

Incorporation of New Jersey Educational Music Company: 1957

In 1957, Benedetto incorporated New Jersey Educational Music Company. Other than a name for his new instrument rental business, however, he had little else. He approached a distributor of musical instruments named Chris Kratt, with whom he had become slightly acquainted during his time at Dorn and Kirschner, and asked for credit in order to obtain an inventory of instruments. Much to Benedetto’s surprise, and relief, Kratt extended $50,000 in credit, asking only for his signature. A loyal relationship between the two men ensued, lasting until Kratt retired years later. As Benedetto expanded his lines of instruments beyond what Kratt had to offer, he always made a point of first approaching the distributor who had been so crucial to the establishment of his business.

Working out of Summit, New Jersey, Benedetto forged his own rental program, starting out with several Dorn and Kirschner customers who wanted to stay on with him. He drummed up additional business by visiting schools and establishing relationships with band directors and music directors, who along with school administrators had the authority to decide on an instrument rental program. Benedetto then worked with his customers to demonstrate the instruments, either at school assemblies or individual music classes. The focus was on the most popular and most commonly rented school instruments: the trumpet, trombone, flute, clarinet, alto sax, and snare drum kit. The school itself would then serve as the contact to the parents and children. In the beginning, Benedetto worked out of the trunk of his car and garage. Each weekday, until mid-afternoon, he made his rounds to the schools, either seeking new business, conducting demonstrations, or picking up and delivering instruments. He then returned home to do his own billing and to repair instruments. During that first winter working in his unheated garage, Benedetto cut the fingers out of a pair of gloves in order to type.

Benedetto’s business was successful enough that he was soon able to afford a small storefront location in Summit. Roughly 15 feet by 30 feet in size, the space was just large enough to accommodate a desk and house his instruments. Benedetto continued to play the trumpet professionally, but because he usually worked until 11 p.m. he had to give up regular weeknight engagements and limit his playing to just the weekends. Dedication to the new business, however, paid off, as the reach of New Jersey Educational Music Company extended well beyond Summit. He was even approached by some music teachers in Long Island who were dissatisfied with their local instrument rental program and drove all the way to Summit to visit with him and ultimately become customers. Benedetto hired a part-time secretary in the late 1950s as well as a service repairman to come in a couple days each week. In 1963, because of increased business, he hired a full-time accountant to handle billing and other bookkeeping chores.

By 1965, Benedetto had outgrown his space and took a lease on a three-story building in Summit. At the outset, he only used the first floor and basement but eventually took over the other two floors. He created a full-fledged service department and hired three sales reps. Although Benedetto still went out on the road on occasion, he mostly confined his work to the office. The reach of his rental program now extended some 100 miles into such areas as Westchester and Connecticut, and he also began to think again about his dream of creating a national instrument rental program. In 1968, he took an initial step by changing the name of the company, which he felt sounded too regional, to National Educational Music Company. He then spent the next two years developing a franchised affiliate program that was unprecedented in the music industry. The concept was straightforward enough: franchisees, relieved of the burden of capital investment, simply sought out business on a commission basis. What Benedetto believed was the key element in his plan, however, was the quality of the instruments NEMC would provide. No longer would children be renting instruments priced by how beat up they were. His customers were to receive either brand new instruments or refurbished, like-new instruments, which to most people were indistinguishable from new. Affiliates were required to ship rental-returned instruments to the New Jersey facilities to ensure that refurbishing was done properly and in accordance with NEMC’s high standards. What was more time consuming in the development of the affiliate plan, however, was the legal vetting that was required. Because Benedetto pursued a franchise approach he had to comply with FTC and state regulations and prepare a detailed Uniform Franchise Offering Circular.

Company Perspectives:

NEMC supports musicians, the music industry, and musical education with a variety of services, all backed by a commitment to quality and performance.

Some two years after the company had proclaimed itself to be a national operation, at least in name, Benedetto’s franchising plan was completed. The only question was whether or not to implement it. Both his accountant and lawyer advised against the idea, maintaining that Benedetto risked too much. Should his concept fail, he likely faced financial ruin. Nevertheless, Benedetto decided to take the chance, calling in his sales reps one day to inform them that starting with the next school year NEMC was making the switch to a license program. They were given the opportunity to become licensees and, although somewhat skeptical, all but one signed on.

Signing Affiliates, Expanding the Business: 1970s–90s

Rather than recruit franchisees by personal contact, Benedetto relied on advertising in trade publications of the music industry. His first marketing effort was a full-page ad in Music Trades featuring an unauthorized use of the Superman character. In reality the ad’s photograph was of a local friend dressed up as the comic book hero. The essential pitch was that by signing on with NEMC a local music store owner would become a Superman of instrument rental sales. To create this ad, as well as brochures to mail to prospective affiliates, Benedetto turned to a local advertising agency, Falcone and Associates. From the outset, Benedetto could tell that his gamble to convert to an affiliate program was going to pay off. A Binghampton, New York, music store became the first NEMC franchise in 1970. Benedetto gradually added franchisees and by 1983 boasted affiliates in more than a dozen states. He outgrew the three-story building in Summit and moved to nearby Mountainside where a 3.5 acre site would accommodate his warehouse needs, as well as a service center and general offices.

In the late 1970s, Benedetto also expanded beyond his basic rental program. NEMC created the first mail-order catalog of band and orchestra instruments, copies of which were sent to band directors with the expectation that they would filter down to children looking to buy replacement instruments. It was during this time that NEMC also became involved in the school bid process and proved to be very successful in winning school contracts for the high-priced instruments that schools generally bought in order to fill out their bands and orchestras. Ultimately NEMC began to use its maximum manufacturers discount to sell instruments to dealers as well.

The NEMC affiliate program grew at a comfortable and steady pace, with new franchises outnumbering the ones that dropped out due to normal attrition. To expand any faster would have required a much larger infrastructure and outlay of cash than Benedetto was interested in making. Nevertheless, by the early 1990s NEMC had affiliates in 46 states. The only states not represented were Hawaii, Wyoming, North Dakota, and Rhode Island. The success of NEMC was not lost on others involved in the musical instrument rental business. In the mid- 1990s, a number of large dealers began satellite programs with smaller stores, essentially copying the NEMC approach on a limited scale, at most on a one- or two-state basis. None of this new breed of competition, however, attempted to launch an affiliate program comparable to NEMC.

Looking to the Future

NEMC faced a number of challenges at the turn of a new century. Because the company again outgrew its facilities, in 1998, it had to acquire some 10,000 square feet of warehouse space offsite. By 2002, Benedetto and a management team that grew up with the company had to decide whether to move again or build on to the current site. Although nearing retirement and taking steps towards a succession of power, Benedetto was still eager to fend off mounting competition and maintain a dominant position in a business that he pioneered. For a number of years he had been asked when he was going to take NEMC public. Such a move was a clear possibility for the future should the company’s plans require a significant increase in capital. What was certain was that Benedetto was determined to remain a step ahead of the competition, which looked to copy his approach and emulate the success of NEMC.