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  January 9, 2013
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Merging New With Old, Texas State Optical Rises to Become the 10th Largest U.S. Optical Retailer

By John Sailer

Texas State Optical's Structure
Being a member-owned cooperative, Texas State Optical has a management structure all its own within the optical community. Its board of directors is composed of 12 shareholders, three groups of four shareholders each who are elected to three-year terms on a staggered basis. Through progressive leadership, directors assume responsibility and move up through the ranks. For example, Benny Peña, OD, just rose to the position of 2013 Chairman of the Board, as reported by VMail Jan. 7, 2013.

While decision making ultimately rests with the board, it is advised by five functional committees—the professional affairs committee, the operations committee, the advertising and marketing committee the vendor relations committee and the political affairs committee. John Marvin and the Texas State Optical staff serve as staff directors for each of these committees, which have about five to seven shareholder members on each.

To be a shareholder member of Texas State Optical, membership dues are not contingent on practice revenue. Each shareholder pays a flat fee of $500 per month for one share of common stock in the company. These shares cannot be purchased by any outside individual or corporation, as the bylaws stipulate that Texas State Optical is the only entity that can buy a share from a member, although it can approve its transfer from one shareholder to another.

In addition to the company's well established branding and the cooperative membership infrastructure, there are numerous other benefits as well. These include educational and networking opportunities for owner optometrists as well as staff, weekly training webinars, patient communication, collective purchasing advantages with suppliers, negotiations with third party payers, market research studies and more.

HOUSTON—By enlisting recently graduated optometrists to capitalize on its 75-year-old brand, Texas State Optical (TSO) has steadily expanded its platform in the Lone Star State to now rank among the top ten in Vision Monday's Top 50 U.S. Optical Retailers.

 

John Marvin,
president/CEO,

Texas State Optical

The turning point came in the late '90s when, after a series of corporate owners, the franchisees decided to acquire the company, a process that was completed in 2001, when the network of independent, professional optometrists became a member-owned cooperative. "What they purchased was the Texas State Optical brand and the authority to license it to other people," president/CEO, John Marvin told dba.

"That put the future success of the practices and the organization in their own hands," said Marvin, who had been tapped to be TSO's first president after having served as the executive director of a franchisee association he had helped the members establish prior to their buying the company outright.

Franchisees Take Over Texas State Optical
Spurred by a desire to maintain as egalitarian a system as possible in which all members are treated equally in terms of control and ownership, Texas State Optical was established in 2001 when the franchisees took over as a member-owned cooperative in which each location has a single share of common stock issued by the state of Texas. The Texas Optometry Act limits any single owner to no more than three locations, and because Texas state law prohibits corporate medicine, all locations are owned by independent professional optometrists because they cannot be owned by corporate entities.

"The driving force in TSO's uniqueness was the priority of the doctors to offer the most opportunity while minimizing if not eliminating most of those things they find unappealing, meaning that someone else is making money from your business," Marvin told dba.

After spending a few years defining its mission statement and deciding how to strategically move forward, the company has steadily grown, adding 41 new locations since 2007. There are now 126 locations throughout Texas. TSO supports some legacy locations in Louisiana, Arkansas and Oklahoma, but Marvin told dba that the company has no current plans to grow outside of Texas, although, "we have not determined that will never occur," he added.

With 126 Stores and $98.3 Million in Sales, TSO Makes the Top 10
Today, TSO's expansion continues, most recently from 109 stores and an estimated $78 million in sales in 2009, to 114 stores and an estimated $81.5 million in sales in 2010, to 126 stores and an estimated $98.3 million in sales in 2011. Those figures are according to Vision Monday's Top 50 U.S. Optical Retailers, where TSO has moved up one step in the ranks for three years in a row, reaching number 10 last year. While the figures for fiscal year 2012 are not yet available, Marvin reports, "All indications look like we've grown in aggregate sales of about 4 percent last year."

Texas State Optical members gather regularly for educational and networking opportunities.

TSO Rosenberg, Texas

 

TSO Fair Oaks, Texas

Marvin maintains that TSO's upward trajectory is fueled by combining its 75-year-old brand with the energy it finds in new graduates coming out of optometry school. Encouraging young, newly practicing optometrists to join TSO has been an effective means of growing the organization and remains integral to its future plans.

"Our goal is that of helping young optometrists open and build their own practice," said Marvin, who explained that TSO helps them find, finance, design and build out a location while also helping them hire and train staff as well as set up the necessary computer systems. "What they really want is to own their own practice," he said, and the company recognizes that the most appeal for its business model is among young optometrists. This is for a variety of reasons, not the least of which is the assistance TSO can help with financing a new practice. "The biggest challenge of a new graduate is financing. They typically have a lot of debt and not a strong balance sheet," said Marvin. "The TSO name goes a long way in mitigating risk for lenders who have confidence in this system."

In addition, more established optometric practices that may be reluctant to change their name are less likely to join the network, he pointed out.

Market Research:
Another Secret of TSO's Growth

To guide its growth, Texas State Optical conducts its own market research. For example, one recent study compared the differing behaviors between someone using third party payment versus someone paying with cash.

Currently, the company is about halfway through research about the perceptions of new patients to better understand what influences them to choose TSO. "This will be helpful in fine tuning our marketing message and customer service," Marvin told dba.

The study consists of interviewing patients who have been to a TSO practice within the previous 60 days and asking them what influenced them to select that particular practitioner. The first phase was completed in January and consists of 600 interviews with new TSO patients. Going forward, researchers intend to speak with about 200 new patients per month until a database of from 2,500 to 3,000 interviews is compiled, providing a picture of why patients choose TSO over potential competitors.

And this is only the beginning. "The criteria that people use to select a doctor is different than the criteria they use to stay with us," Marvin told dba. "If all we focus on is how we get you in the door rather than how we keep you, then we've missed something. The real learning is determining what is critical for them to select you and stay with you and refer others to you. That's what this study is helping us understand," he said, alluding to the ultimate goal of this multi-phase study.

New Optometry Graduates are Key to TSO's Success
Reaching new graduates is achieved partly by maintaining strong relationships with the two optometry schools in Texas—the University of Houston College of Optometry and the new University of the Incarnate Word Rosenberg School of Optometry.

TSO Galveston, Texas

For example, each year TSO donates $10,000 to each school for scholarships. Three $2,000 scholarships are given to three third year students, and $4,000 is provided to an endowment fund for first year students to be distributed according to each school's own criteria. "I've seen students get a first year scholarship, a third year scholarship and then become a member of the network," said Marvin. In addition, TSO hosts an annual meet and greet early in the school year for its member doctors and first year optometry students as well as a formal banquet each spring for third and fourth year students at both schools.

For presentations to these groups, Marvin told dba, "We will use one of our younger, newer network members who can say, 'Seven years ago, I was sitting where you are now, meeting the doctors of TSO for the first time,' and then they can explain what they've learned and experienced since joining."

The strategy is working. Taking the strength of an established, statewide, multi-generational brand, about which it's not uncommon to hear, "Texas State Optical is where my parents took me for my first pair of glasses," and combining it with the passion and drive of young emerging optometrists has proven successful for this member-owned cooperative of independent, professional optometrists.

TSO Cypress, Texas

 

 



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