How home improvement store founder John Menard became the richest man in Wisconsin – and what he sacrificed to do it.
Paul’s father John Menard, the richest man in Wisconsin, had long loved racing. He had owned an Indy-car racing team for 25 years, beginning before Paul was born. Paul practically grew up on a racetrack, cutting his teeth on go-kart and ice boat racing. By age 8, he’d scored his first competitive win.
Tough competition was nothing new for Paul’s dad. John Menard had built his regional empire of home improvement stores one two-by-four at a time until it had more than $6.6 billion in annual sales and 37,000 employees. He’d also protected it from big-league interlopers Home Depot and Lowe’s, and between 1996 and 2007, his personal net worth grew from $775 million to $5.2 billion, according to Forbes magazine. Menards’ catchy slogan, “Save Big Money at Menards,” seemed to jingle relentlessly from every radio and TV, worming its way into the heads of shoppers across America’s heartland.
Racing spread the store’s name all the more. Team Menard Inc. won the Indy Racing League championship twice. Yet, in his black team jacket and cap, Menard looked more like a guy who shopped Menards than a man who had the highest tax bill of any American in 2002. On Forbes’list of the world’s billionaires, he ranks 155th. That’s well ahead of Herbert Kohler, Wisconsin’s second-richest man, whose estimated family wealth is $4.5 billion. Kohler had inherited the plumbing empire founded by his grandfather. Menard, the Eau Clare farm boy, had done it himself.
Empire building can be an all-consuming task, and John wasn’t always there after his son crossed the finish line. This time, Milwaukee Mile communications vice president Jim Tretow had seen John Menard hoot and holler when his son won. When the time came for a Victory Lane family photo celebrating Paul’s first win in 85 Busch starts, however, Paul’s girlfriend, mother and sister were there. His father was not. Those who know him say John was probably already on his way back to company headquarters in Eau Claire.
“He’s a loner. He’s normally by himself and just moves in and out of the shadows,” says Indianapolis Motor Speedway track historian Donald Davidson. Menard rarely gives interviews and refused to grant one for this article. Even those who know him well describe him in contradictory terms, as both hero and villain; the very model of a successful American entrepreneur; both brilliant and charming, yet also a foul-mouthed micromanager and a perfectionist who can be cruelly demanding with employees.
Even those closest to Menard are not sure what drives him. The state’s richest man may well be one of its least known.
John Robert Menard Jr. was born in 1940 in Eau Claire, the eldest of eight children. His parents were teachers – John Menard Sr., a University of Wisconsin-Eau Claire math professor; his mother, Rosemary, at St. James the Greater, a Catholic grade school. Before John entered high school, the senior Menard left the university and moved the family to the countryside to build one of the state’s largest dairy herds.
Like farm kids everywhere, John learned the value of hard work and frugality. But he hated the morning chores, fearing they left him smelling like the farm when he got to the local Catholic high school. He developed a habit of dousing himself with cologne, says one insider.
“There’s an independent streak that runs through the family and owning your own business has always been a big deal,” says his cousin Frank Watson. That ethic influenced John Jr., “but he was never interested in staying on the farm. He wanted to escape it,” Watson adds.
While John was still in high school, his father hired a company to build a pole barn, and John got a summer job working with the crew. After just two years of working with the pole barn company, John Menard hired his own crew and began selling pole buildings himself at the side of the road near his family’s farm. He worked days on his fledgling business, nights at a local movie theater. It was 1960 and he was just 20 years old.
“It was quite a struggle,” Larry Menard – John’s younger brother and Menards Inc. vice president and operations manager – said during an August 2006 arbitration hearing. “We didn’t have any money. It took until about 1964 when … we were able to sell a lot of asphalt shingles and things like that.” John’s pole building customers frequently asked to buy building materials because lumberyards were closed on weekends. John opened Menards Cashway Lumber to serve them, and upon graduation from college in 1963, turned down a job with IBM to build his own company.
“John always paid attention to the littlest details,” says a 1963 employee who stayed with Menards for more than 30 years. “In his lumber yard, he’d recycle scraps, like short pieces of two-by-fours that would have been garbage to other people. They were clean cut so they could be sold or made into treated tree rings.”
Scrap wood that couldn’t be sold was used for heat, after any nails were reclaimed using magnetic rollers. Today, the ex-employee adds, Menard heats most of the 60-plus buildings at his nearly 650-acre Eau Clare corporate headquarters by burning scrap pallets.
“John’s absolutely driven to maximize everything,” says Steve Kight, former managing director of Menard’s British racing engine company, Menard Engineering Ltd.
Menard quickly grew Cashway, adding a truss plant, operations for treating lumber, producing countertops, pre-hung doors, boards, steel and nails. By making some of the products he sold, he kept prices low. In 1972, he incorporated Menards Inc. and opened his first hardware store just in time to catch the building wave of do-it-yourselfers, according to industry analysts.
Like Wal-Mart, John Menard built a retail empire on having the cheapest price. The products he manufactured, including dog houses and picnic tables, accounted for about a quarter of the items sold. With no middleman to pay, Menard cut 10 percent off the cost of a steel door.
“We had a policy, we will never be beaten on price,” says former Wausau assistant store manager Norm Baumann, who worked for the company from 1996-2006. Menard had managers check competitor’s prices and count cars in their competitor’s lots over their lunch breaks. Menards would beat every price by at least a penny, and watch the traffic at competitor’s car lots dwindle.
“They comparison shop constantly,” says Bauman. If they couldn’t beat a price, Menard would order his managers to buy up a competitor’s entire supply of that product. Bauman recalls Home Depot selling oriented strand board, a plywood substitute, for much less. Menards managers would quietly buy trucks full of the competitor’s product. “I bought over two fork lifts of it myself, $4,000 worth,” Bauman recalls, “and when I got back to the store, they’d credit back the money.”
Menard would buy up a manufacturer’s overstock and rejects for pennies on the dollar. In the 1980s, “he bought ships full of Fiat tractor parts that had been refused by the customer who’d ordered them. John had them painted, got them put together, and we sold them,” recalls Steve Faber, who served the company for 19 years, including 15 as an Iowa store manager.
Menard’s wheeling and dealing produced an eccentric merchandise mix. “One year, we had truckloads of poinsettias” and another year Bumpy Diapers, says Ivan DenOuden, a former department manager in Mason City, Iowa. “We sold more diapers than the Target next door. There were all kinds of one-time buys. Gloves, candy, coffee. You made more money on that than lumber, where you had to sell 10 two-by-fours to make 50 cents because you competed against the other big boxes.”
The result was a unique shopping experience. “It’s entertainment. It changes every day. There are new treasures,” says Edward S. Archibald, who left the company two years ago after a 27-year tenure that included a decade and a half as a top executive. In 2004, Home Channel News magazine described Menard’s “treasure-hunt” mix of Home Depot, Dollar General and Wal-Mart. “Many Menards’ units have … the ambience of,
say, Kmart, circa 1978.” Yet, it said, “there were cutting-edge flourishes” its competitors lacked, including computerized kiosks that convert the dimensions of a proposed deck or garage into a shopping list of materials needed to complete it.
Tinkering with that mix in February, Menard added milk and groceries at some locations. “Anything they can make a buck on … They’re kind of the Wal-Mart of the home improvement industry,” says Scott Bropst, a Menards employee for 21 years and a store manager for 14.
Menards’ approach has its critics. “Popcorn and peanuts, all that crap at the checkouts, that’s a big mistake,” says Will Ander, senior partner of the Chicago retail consulting firm, McMillan/Doolittle
LLP. “They buy bulk peanuts by the truckload but they get stale. And as a shopper, I’m not very happy when the peanuts I buy are stale. It’s more important for Menards to focus on what it’s great at: home improvement.”
But the “junk in front” reinforces the image of a bargain-hunter’s paradise. The higher markups and steady sales for consumer goods may also cushion the impact of any slowdown in home sales, a problem that has recently hurt competitors Home Depot and Lowe’s.
In a September 2004 Federal Tax Court case, an IRS expert placed Menards’ return on assets at 14.2 percent compared to Home Depot’s 10.3 percent and Lowe’s 6.8 percent. In the same case, a financial analyst hired by John Menard, examined comparable retail chains and put Menards in the frugal bottom 10 percent for average debt. Menards built new stores without having to get a bank loan.
Like Wal-Mart, notorious for bullying manufacturers, Menards played hardball with suppliers. His buyers were “ruthless,” says Baumann. “I’d hear them on the phone and you’d never hear so much swearing in your life. They’d say, ‘I’ll buy this from you, so what are you going to give me for free?’”
In 1979, Menard invested in a $65,000 race car and hired a neighbor to drive it in the Indianapolis 500. It became a marketing vehicle for his stores and a way to shakedown suppliers. “He was absolutely a pioneer at leveraging shelf space to get sponsors for his Indy team,” says Eric Wright, research and development vice president for Joyce Julius and Associates, the most prominent sponsorship reporting service in racing. “You see it now with Lowe’s, Home Depot, Target and Best Buy, but he was way ahead of the curve.”
If you wanted shelf space at Menards, you were pushed to buy a racing sponsorship. Between 1997 and 1998, Glidden Paints spent nearly $4 million on Team Menard sponsorships; in 2002, Stanley Tools and Moen each paid around $1 million.
But “the primo advertising spot, the rear right fender, the area that the TV cameras grab most,” Menard saved for his own store, notes Milwaukee Mile’s Tretow. “His team was as much about marketing his Menards stores as it was about racing.”
One casualty of Menard’s tough negotiating was driver Andy Petree. Petree had won a pair of NASCAR championships as Dale Earnhardt’s crew chief, but struggled to find sponsors when he formed his own team. John Menard negotiated a three-year sponsorship contract that was not only a good deal for the company, but allowed his son Paul to advance his career by driving a Petree car. “John strong-armed me to a point where I probably should have said no,” Petree says now, explaining he was soon “at the financial breaking point.”
More crushing for Petree, in midseason, John took his millions and his son and joined forces with Dale Earnhardt Inc., the racing team run by Earnhardt’s widow. “It’s rare in the racing world for someone to break a contract the way he did, but when you’re John Menard, I guess you can do that,” says Petree, who spent the next 18 months laying off employees and liquidating assets. (He is now an analyst for ABC-ESPN’s 2007 NASCAR coverage.)
Menard’s negotiating ability is so renowned, says former Indianapolis 500 champion driver Eddie Cheever, that if Menard ever spent an hour lecturing on the topic, Cheever would be there. A former Menard racing partner, Cheever once spent an hour and half arguing with Menard over a $25 hotel bill, only to pay it himself.
Menards’ marketing strategy was three-pronged, beginning with a weekly circular that featured low-priced and even free goods like a 75-cent extension cord. By sending in a rebate coupon, customers got their name on Menards’ mailing list, and a coupon they could cash – on their next visit. The second prong was Menards’ ear-worm ads featuring freelance Wisconsin announcer Ray Szmanda and the slogan “Save big money at Menards.” The folksy Menards’ Guy became almost a cult figure.
The final prong became Menards’ racing sponsorships. His drivers and race cars would greet guests at grand-openings of new stores. Given the overlap between home improvement customers and racing fans, it was a natural fit, and Menard ended the 1980s with more than 45 stores in five states.
By the early 1990s, Atlanta-based Home Depot, the country’s second-largest retailer after Wal-Mart, had its eye on the Chicago market. John Menard considered Chicago the heart of his territory, and he was determined to dominate in that market.
Without time to start from scratch, Menard converted an assortment of empty retail outlets. Bropst was assigned to the Lombard, Ill., store. There were reasons the stores Menard acquired had closed. In Lombard, “there were a lot of problems. Crime. Thugs. A ton of staffing problems. We got a lot of that cleaned up,” says Bropst.
Menards ended 1993 with $1.7 billion in sales, aided considerably by 18 new Chicago stores in three formats, ranging from small Hardware Plus outfits to super stores. When Home Depot opened its first Chicago store the following September, “we were ready and waiting,” Bropst says.
Home Depot entered another Menards stronghold, Milwaukee, in 1998. But the real competition remained in Chicago, hastening the demise of smaller regional chains Courtesy Home Centers, Builder’s Square and Handy Andy. Lowe’s entered the market in 1999. Historically, the companies Home Depot and Lowe’s had put out of business were the size of Menards. And the two giants did throw their weight around, pressuring manufacturers Kohler and DeWalt not to sell products to Menards, says Archibald.
For big box retailers, three’s a crowd, and the third-best is inevitably driven out of business, says Ander, the Chicago-based retail consultant. But in much of its 11-state region – Wisconsin, Minnesota, the Dakotas, Iowa, Michigan, Ohio, Indiana, Illinois, Missouri and Nebraska – Menards ranks first or second. It runs neck-and-neck with Home Depot in Chicago (each has around 30 stores) and dominates Minneapolis-St. Paul with 19 stores. In metro Milwaukee, Menards has nine stores, ahead of the five Lowe’s stores and second to Home Depot’s 12.
Home Depot’s return policy is the stuff of legend. In their book Built from Scratch, company founders Bernie Marcus and Arthur Black recounted how in the 1990s, a man tried to return a set of tires, even though Home Depot didn’t sell tires. The service desk employee called corporate headquarters for guidance. He was told to ask the customer how much he’d paid for the tires and to give him a refund. From that day on, the tires hung near the service desk, a reminder that the customer is always right. Home Depot worried less about theft and error than the lifetime value of the customer.
Menards’ policy was a sharp contrast, allowing no returns without a receipt. But pushed by Home Depot, by the mid 1990s, Menards policy had changed to “If we sell it, you take it back,” says Bropst.
As the competition heated up, Menard complained to the Council of Better Business Bureaus that Home Depot’s ads in both Chicago and Minneapolis-St. Paul – which suggested Menards sold inferior merchandise – were “blatantly” false. In 2003, Menards sued Home Depot, alleging it “ripped off” his company’s flyers and posted them in its stores. The dispute went to mediation before a federal magistrate and was settled in Menards’ favor for a small cash amount.
Things went more smoothly on the race track. Menard’s team won the Indy Racing League championship in 1997 and again in 1999. Perhaps giddy with victory, he suddenly opened up to the media, even confessing to a national publication that he fantasized about driving his race car over Home Depot’s CEO.
In 1999, Advertising Age hailed Menards “excellence in brand building” in “going head-to-head with Home Depot.” Menard was named one of the publication’s 100 marketing marvels.
Menard found another way to beat his rivals. He paid himself $20.6 million in 1998, three times more than the Lowe’s CEO and seven times more than Home Depot’s. “In his world, everything is measured by your bank account,” says a former high-level corporate exec who asked for anonymity. “He kept telling me, ‘It’s a game and I’m winning.”
For years, Lowe’s had stayed out of the Midwest market, partly because Menards was so strong and has very loyal customers, says industry analyst Keri Spanbauer of Thrivent Financial for Lutherans, a major investor in Home Depot and Lowe’s. Rumors circulated that Lowe’s would acquire Menards, but instead, it moved into Chicago in 1999 and Milwaukee in 2005.
“Increasingly, new stores cannibalize sales at a chain’s existing stores or they bump heads with a competitor,” Spanbauer says. A Merrill Lynch report last summer put the U.S. retail home improvement industry at 85 percent saturation.
And Home Depot is having problems. In December 2000, the company named a new CEO, Robert Nardelli, who had no retail experience. When Menard heard the news, he was salivating, says Archibald. “John called me up and said, ‘let’s go have the most expensive steak in town and celebrate.’”
Customer service deteriorated under Nardelli, and he was let go earlier this year. Analysts say the company still has leadership issues, an antiquated inventory control system and stores that look tired and disorganized.
By contrast, the Lowe’s management team is considered top notch. Its stores are newer, cleaner and offer a shopping experience emphasizing the fashion element of home improvement that women particularly like. “Lowe’s has become a much stronger competitor,” says Spanbauer.
The number of do-it-yourself customers is declining, experts say, prompting Home Depot and Lowe’s to offer their own installers. “Let’s build something together,” as the voiceover by actor Gene Hackman declares in Lowe’s ads. “You can’t just sell items any more,” says Ander. “You’ve got to sell solutions.”
But Menards staunchly protects its relationship with its first and most profitable customer, contractors. It doesn’t want to take business from them. Instead, it provides customers with a list of private contractors.
Menard also clings to his mantra, “Save Big Money with Menards,” even as the original low-price leader, Wal-Mart, has begun to question whether an obsession with price still works, given its slowing sales growth.
In 2004 and 2005, while Lowe’s and Home Depot downsized and focused on opening smaller, 80,000- to 100,000-square-foot urban stores, Menard super-sized his new stores. He built a mammoth two-story store in St. Paul, Minn., complete with a moving walkway that carries customer’s carts – past a baby grand piano and plasma screens advertising specials – to the second level. In Duluth, Minn., he opened the mother of all home improvement big boxes, a 250,000-square-foot behemoth, more than twice the size of a typical Home Depot. Menard expanded kitchen and bath vignettes and added an appliance showroom and garden center to his already extensive product lines.
The company plans more monster stores. It’s a big gamble, industry observers say, but it might also assure the company’s survival.
Menard has meanwhile lost the marketing edge he once enjoyed with racing sponsorships. Home Depot, not Menards, is the “Official Home Improvement Warehouse of NASCAR.” In 2005, Home Depot – with former Menards driver Tony Stewart – captured NASCAR’s top prize, the Nextel Cup championship, then Lowe’s won the crown in 2006. This translates into millions of dollars worth of publicity. Last year, the value of Menards’ racing-circuit exposure was worth $22.2 million, estimates sponsorship expert Eric Wright. But Home Depot’s was worth $98.6 million and Lowe’s was $143.6 million.
Perhaps not-so-coincidentally, by 2006, Home Depot had annual sales of $81.5 billion and more than 2,000 stores in the U.S., Mexico, Canada and Puerto Rico. Lowe’s sold $43 billion at 1,250 stores in 49 states. A distant third, Menards’ 2005 sales revenue was an estimated $6.5 billion from 211 stores, according to industry analyst Dunn and Bradstreet.
Still, Lowe’s and Home Depot saw total same-store sales slump in 2006, while Menards enjoyed record profits.
Ruling by Intimidation
John Menard earned his college degree in business, but he once told a top Menards officer that his minor in psychology was far more important, because “how you treat people” was the key to his success.
His style is suggested by an innocuously titled pamphlet, Grow with Menards, which details the company’s standard operating procedure. It was inspired by Larry Menard’s Army experience during the Vietnam crisis, he told an arbitrator last August. To this day, Larry said, that booklet “is basically our rule book.”
Menards managers must sign a work agreement in which they consent to pages of rules and penalties: They are fined $10 if there are more than 15 carts in the parking lot, $100 a minute if a store opens late, $10 if a customer doesn’t pick up a special order within 10 days. With military-like discipline, a manager’s absences are tightly
controlled, and suggestions to a superior are not welcome.
The rules also reflected the personality of a man who started with nothing and succeeded by pinching pennies. “That company’s his life and when he feels someone is taking money out of his pocket, he just goes nuts,” says Kight, the ex-director of Menard’s racing engine business. The National Home Center News,a New York-based trade publication, quoted vendors describing Menard as “‘tenacious,’ ‘frightening,’ ‘entrepreneurial’ and ‘paranoid’ all in the same breath.”
Managers are prohibited from building a home, even if they purchase the construction materials elsewhere. It’s a measure to prevent employee theft, John Menard once told the media. The penalty is termination.
Even minor building projects concerned him. On numerous occasions, former managers say, Menard hired private investigators to take photos when an employee added a deck or addition, then had internal examiners cross-reference the materials in the photos with items the employee had purchased, looking for products that had been stolen.
The most infamous casualty of this policy was Eldon Helget, a lumber yard manager for Menards’ Burnsville, Minn., store. Helget’s daughter was confined to a wheelchair and the narrow hallways in the Helget home made it difficult to get around. She was getting too big for her mother Linda to carry her up the stairs, and because the bathroom couldn’t accommodate her wheelchair, the girl had no privacy. When the Helgets could find no home that met their needs, they decided to build from scratch.
But Helget’s boss, Larry Menard, said there were no exceptions to the company rule. Helget, who had a stellar 13-year record with the company, could resign his post and take a lower-level job, Larry said. That meant a $15,000 cut in his $40,000 salary, but Helget still agreed.
The Helgets hired a contractor to build a ramp-equipped home, using building materials from another company. When John Menard heard about the deal, he fired Helget. The company notified Helget that if he ever showed up on its property again, he’d be arrested for trespassing.
“John would say, ‘Why make a rule if you’re not going to enforce it?’” Archibald recalls, adding “sometimes, you have to cut throats. That’s how business works.”
Helget’s story found its way into the Minneapolis Star Tribune.A columnist called Menards’ policy, “something exhumed from the Bronze Age with all its primitive logic intact.” The story continued a second day when a local lumberyard offered Helget a job. The Helgets were elated – until they discovered Eldon’s contract with Menards barred him from working for a competitor for a year.
This rule came from Menard’s concern that his trade secrets might be revealed. Indeed, he refused to hire former Home Depot or Lowe’s employees for fear the person might be a spy.
Linda Helget phoned Menard to plead with him to relent. “He said we could find a house in another town, but all our friends and family are here. He thought he was a real stud muffin the way he talked and I said ‘who are you to tell us where to live?’ I told him ‘someday I hope a train runs you over and cuts your legs off.’’
TheNational Enquirertrumpeted the story to the rest of the country. The Helgets filed a wrongful firing claim against Menards; their attorney Edwin Sissam took the Menard brothers’ depositions. Sissam had expected John Menard to be a sophisticated businessman in a wool suit. Instead, he got “a cowboy in jeans with his shirt partially unbuttoned and a chain around his neck,” he says.
“It was clear Mr. Menard is very, very secure in himself. His body language, his mannerisms, answering questions when he wasn’t asked; not answering them when he was,” Sissam says. “Most companies with an employee with a disabled daughter would want to be behind the family … But John Menard had this attitude, ‘Who the hell is telling me how to run my company?”
The Helgets took Menards’ second settlement offer, “somewhere between $1 and $50,000,” says a source close to the case, which was settled in 1992.
In his quest to run things his way, Menard was the ultimate micromanager, employees say. “There’s an emotional youthfulness and wonder about him – like a kid having fun – and then he says, ‘wait a minute, I can’t control that,’ and he tries to control absolutely everything,” says Kight.
Menard often goes through the mail of his top executives and tirelessly reads through customer complaints, former insiders say, looking for problems or hints that an employee gave something away at his expense.
The Menard brothers are notorious for dressing down employees. In the arbitration case last August, former Menards assistant store manager Cory Lickiss testified under oath that the day before he resigned, Larry Menard had called him a “f-cking retard” in front of 15 customers and many employees.
“We used to joke when a letter came from headquarters that it would start with either “What the F…” or “Why the F…,” says former manager Bropst.
Corporate keeps a close eye on sales per customer per area, Larry Menard testified last August. Menards hired secret shoppers to evaluate service, a typical retail tactic, but it also had an extensive crew of merchandising and operations people who flew out of Eau Claire on six company airplanes seven days a week. Others hit the road in Menards’ fleet of cars to do inspections.
If John Menard was in a given city, he’d do his own, often in a crude, but unintentional, disguise. His hair color could be red, golden brown or shoe-polish black, says a former insider, explaining that one of Menard’s ex-girlfriends owns a salon. “She’s not a gifted colorist, but the price was right.”
The home office monitored every store’s security cameras for at least an hour a day. “We can see team members doing their job well or not doing their job,” Larry Menard told the arbitrator. “We can see too many carts, not enough carts. We can see lines at registers and do corrective action.” The result was often a blizzard of memos to store managers, insiders say.
Menards was adamant about keeping a union out of its stores. “When I was promoted to assistant general store manager, the first thing I had to do was go to a one-and-one-half-day seminar in Eau Claire about fighting unions,” says Baumann. “If a person had ever worked in a union shop, you couldn’t hire them.” Bropst was forced to fire two promising management trainees because they’d been baggers at a unionized grocery store while in high school.
Under Menards policy, managers would see their pay cut by 60 percent if their store became unionized, notes Iowa ex-manager Faber. And the pay for managers was generous: $80,000 to $200,000 a year with bonus and profit-sharing included. It was particularly good, given that more than half of Menards managers hadn’t graduated from college, Larry Menard testified.
But the corporate culture “just beat you down and made you feel you’re replaceable, and that you had no other options,” says Bropst. Most store managers haven’t lasted long enough to retire, insiders say.
Managers have to make do with very lean staffing. In 1996, the industry’s Home Channel News magazine called Menards’ staffing “remarkably frugal,” with 52 employees per store, including headquarters personnel, compared to Home Depot’s 195. Menards store managers make an annual pilgrimage to Eau Claire to “negotiate” their store’s budget, but couldn’t budge the number much, managers say.
Some budget-squeezed managers could be so short staffed, they had trouble meeting demands headquarters placed upon them. Managers who questioned the rules might do worse. All Menards managers must sign an agreement requiring them to go to arbitration – not the courts – if they have a dispute with the company. Moreover, they’d have to pay their own attorney’s fees and half the cost of the arbitrator, even if Menards was found at fault.
When an even more draconian clause was added later, Faber, the former Iowa store manager, questioned it and drew Larry Menard’s ire. The new dictate required that managers pay a $200 deductible if a delivery driver they hired was in a traffic accident. Faber testified later that Larry told him he’d “hire someone younger” who would probably do a better job for less money if Faber didn’t want the job.
“Questioning their policy was the beginning of the end,” Faber says now. Company audits soon began finding problems with how he operated his store.
Ultimately, Faber, a 20-year veteran of Menards who was then 48, was replaced by a 29-year-old. Faber was offered a demotion in a different city. He refused the transfer and filed an age discrimination complaint, but lost.
Talking to the arbitrator, Larry Menard described the company’s practice of demoting managers as a benevolent act, reserved for high-potential individuals who “have kind of gone astray” and needed time to reflect and “get their act back together.”
Menards offers the targeted employee another job, but always for less pay, at a lower rank, in a different city, so the employee must uproot his or her family.
Bropst, too, had dared to question an order, this time from John Menard.
“That was the beginning of the end of my career with them,” he says.
Larry Menard told Bropst he’d have to move. “They offered me another new store in Wilmer, Minn., and said ‘take it or leave it,’” he recalls. “I was nearly 40 years old and I figured it was time to stand up for myself … or I’d dance their tune forever.” Bropst quit.
When Bropst became the manager of a competitor’s crosstown store a few months later, Menards sued. “They wanted $25,000 from me for my non-complete clause.” Bropst spent $4,000 in legal fees, eventually getting the
But Menard came back seeking an injunction against Bropst. “They tried to sue me for soliciting their employees,” he says. At that point, Bropst says, his new employer said “you’ve got a store to run,” and it joined in his defense. When Bropst showed up in court with the 50 applications he’d received over the Internet from Menards employees, the judge dismissed the complaint. And with his employer’s legal team involved, Menards’ suits stopped.
Bropst recounts horror stories of how other employees were handled.
One involved a North Dakota Menards store manager. The manager’s wife had triplets that came early and required special attention at the University of Minnesota Medical Center. The manager spent a small fortune on plane fare commuting back and forth. He still worked 35 to 40 hours, but his contract required a minimum of 55 a week, so his weekly pay dropped from $1,000 to $500 or $600, Bropst says. “Two of the babies didn’t make it, and John (Menard) fined him $2,000 [out of his bonus] because he had to bury two of his kids and didn’t put in 55 hours those two weeks.”
“John expects his employees to be like him,” says former Menards exec Archibald. “The company has to come first; families get in the way.”
But Archibald adds, “In John’s defense, the few times he has fallen for someone’s sorry-ass excuse, they’ve stabbed him in the back and left the job anyway.”
Most observers suggest those occasions have been rare, however. More often, Menard gets outraged at those who question how he runs the company he built. It’s about power, Archibald says. “Whatever he does, he does it because he can.”
The Price of Success
Edward Archibald served Menards for 27 years, including 15 years as its top merchandizing and marketing executive. Former company insiders describe him as John Menard’s “right-hand man.” But two years ago, John Menard accused him of taking a kickback from a supplier. Archibald demanded proof, he says, and when none was provided, walked out and never returned.
“I still love John like a brother,” Archibald swears, but he couldn’t stomach his treatment. “After 27 years, I expected more.”
Archibald and three other former Menards’ executives (two of whom asked for anonymity) offer a portrait of a boss whose great wealth hasn’t necessarily brought him happiness.
In 2002, Menard owed more in personal federal income tax than any other American: $228 million on $593 million in adjusted gross income. Menards Inc. had become an S-Corporation, where profits are passed on to owners and taxed at their personal tax rate, and John Menard owned 88.7 percent of the company.
Menard is not known as a philanthropist. “He doesn’t go for all these foundations and write-offs,” offers former Eau Claire state senator Dave Zien.
Greater Eau Claire Area Chamber of Commerce President Robert S. McCoy says Menard does support Regis High School, a Catholic school. “He’s probably done things people don’t see,” McCoy speculates.
Eau Claire’s city fathers would love to have “The Menard Center,” a civic and convention hub funded by the entrepreneur, but as Menard’s cousin Watson says, “I don’t see why John needs another building with his name on it; he’s already got over 200.”
Menard is frugal at home, too. He lives down the block from his brother, Larry, in the 1972 ranch he shared with his second wife, Paula Christine, and their three kids, J.R. (John R. Menard III), Paul C. and Molly C., until the couple divorced in 1993. The 11-room, one-story wood home has five bedrooms, three baths, two fireplaces and a property assessment of $425,000. It’s equipped with a big screen TV, and in the basement, a model railroad setup that “looks like something you see in the movies,” says Dominic Giuffre, who once tried to buy the Milwaukee Mile with John Menard. A former Menards exec calls the train set “John Menard’s perfect world,” because “he controls everything. Nothing moves without his approval.”
Menard’s divorce was triggered after Paula started taking tae kwon do classes, and John objected, and Paula objected to that. So says Archibald, who added that he’s spent more time with John Menard in the past 15 years than Menard’s own family has.
Paul, the race car driver, now 26, moved to North Carolina to get out of his father’s shadow, says Archibald. J.R., 28, and Molly, 23, work for Menards. All three have trust funds filled with Menards stock. Additional IRS cases show the Paul C. Menard 1985 Trust had a 2002 taxable income of $30.4 million; Molly’s trust, $4.5 million.
The end of John’s first marriage was messier, and John’s relationship with his two children from it, 43-year-old Renee and 40-year-old Christopher, is rockier. Archibald says the children have “never forgiven their father for having an affair with another woman while he was married to their mother.”
Menard had an out-of-wedlock daughter named Michelle, 39, who changed her last name to Menard and worked for the company for awhile.
Both Christopher and Renee worked for Menards, but when they were old enough – in their mid-30s – “they cashed their stock options and got $15 to $20 million in 1990 dollars and walked away,” says Archibald. Sources say Renee has rarely let Menard see his grandchildren by her. [Reached by phone, Renee laughed and said “No. No,” when asked to discuss her father. Milwaukee Magazinewas unable to reach the other Menard children.]
“John’s trying to buy off his younger children, so they won’t leave him, like the older ones did,” Archibald says. Within a few years, he says, the youngest will be eligible to start receiving money from their trust funds, but paid out in 10 annual installments instead of one lump sum.
“John Menard’s first, second and third true loves are Menards Inc. Everything – including his family – comes after that,” says Kight.
Adds Archibald, “He’s been a failure when it comes to his family, when it comes to relationships. He’s had six children by three women, married and divorced
two of them. And two long-running girlfriends, Darla [the hairstylist] and Debbie, an attorney.”
In late 2006, Menard broke up with his fiancée, Debbie, just two weeks after firing her sister, the company’s general counsel of 10 years, Dawn Sands. (Dawn Sands has filed an arbitration action against the company and declined to comment.)
Perhaps the closest relationship Menard ever had was with Indy racing driver Scott Brayton, who raced for Team Menard for four years. Brayton was quoted calling Menard “one of my dearest friends.” He would call Menard at home late at night and they’d talk for hours, Indy historian Davidson says.
But Scott died at age 37 in a 1996 crash at Indianapolis. Menard was at the racetrack, and comforted Lee Brayton, Scott’s father. Menard didn’t leave Lee’s side until after Scott’s wife and mother arrived. “John was very, very good to the family. He and others, Firestone, the Speedway, Dale Earnhardt Sr., Roger Penske, they contributed a lot of money for a scholarship for [Scott’s 2-year-old daughter] Carly,” Lee Brayton says.
Menard later hired Scott’s widow, Becky, to do public relations for his racing team, and allowed her to work from home.
But this sort of compassion was rare, his associates say. Menard’s style is suggested by how he paid people: As company president and CEO, his $20.6 million pay in 1998 included a bonus equal to 5 percent of the company’s before-tax profit, an arrangement he instituted in 1973.
Compensation for Menards’ other corporate officers, revealed in the company’s 1998 tax case, showed a massive drop from the CEO’s salary: operations manager Larry Menard at a $45,000 base salary and $180,000 bonus; John’s son, Christopher, then still with the company as corporate secretary and Eau Clare distribution center manager, at $172,815; Marvin Prochaska, head of real estate, at $121,307, and chief financial officer and treasurer Earl Rasmussen with $55,702.
A 2002 tax filing showed Menard owned 100 percent of the company’s voting stock and 56 percent of its nonvoting stock. Trusts named after Menard and his family members held the remaining shares.
None of Menard’s children want to take over their father’s business. John, now 67, had “a serious health scare,” a “prostate problem,” Archibald and others say, but he’s reportedly recovered.
Ander, the retail consultant, says that Menards Inc. has succeeded through strong leadership by “a benevolent dictator.” But after the dictator’s gone, “does the culture survive?” Ander asks. “Does the company?”
John Menard has made it clear his 33-year-old nephew Charlie Menard, Larry’s son, will be his successor. Menard named the race car driver (on the regional Midwest circuit), who’s never worked outside of the family firm, chief operating officer in 2005.
“He’s the only one that wants it, but he’s not capable,” says a former high-ranking executive. Former Menards executives describe Charlie as “a computer geek” and “a nice guy” who lacks the business and people skills to run the company.
“If they continue to mimic what’s being done today, they could survive a long time,” Archibald says, likening the company to great race car. Anyone can drive it, Archibald says, until it crashes. “When it comes to decisions about how far to expand, John had a wisdom that these people don’t.”
But it may not matter who becomes the next CEO. When John goes, Archibald predicts, Menards “is going to go up for sale and the kids will split up the proceeds.” If the new owner takes Menards’ concept nationwide, he adds, “they will eat Home Depot’s and Lowe’s lunch.”
Others are not sure. Can you separate the Menard concept from John Menard? He has controlled every aspect of the company since he started it. And it’s brought him extraordinary success, but has it brought contentment? Happiness isn’t as easily controlled.
“That’s the toughest question,” says former Menard engineering director Kight. “When he gets happy, I think he struggles with that. He distrusts that.”
And what does he trust?
“John’s life is his business,” Archibald says. “That’s it.”
Mary Van de Kamp Nohl is a senior editor at Milwaukee Magazine.
Arsenic and Old Waste
John Menard’s many environmental violations.
John Menard and his company have had more run-ins with the Department of Natural Resources (DNR) than any other Wisconsin company, state justice department lawyers wrote in a complaint against Menard in 2005. DNR officials have cited Menards at least 13 times since 1976 for ignoring or violating state regulations related to air and water pollution and hazardous waste.
The company has had environmental problems in other states, too.
• In 1994, Wisconsin obtained a civil judgment against Menards for the unlicensed transportation and disposal of ash produced by incinerating CCA-treated lumber. Wood treated with CCA contains chromium, copper and arsenic – a known carcinogen. It is considered hazardous waste and requires proper disposal in a licensed landfill. The company was fined $160,000.
• In 1997, John Menard was caught using his own pickup truck to haul plastic bags filled with chromium and arsenic-laden wood ash to his own home for disposal along with his household trash. Menard pleaded no contest to felony and misdemeanor charges involving records violations, unlawful transportation and improper disposal of hazardous waste. Menard and his company were fined $1.7 million for 21 violations.
• In 2003, the Minnesota attorney general charged that Menards manufactured and sold arsenic-tainted mulch in packaging labeled “ideal for playgrounds and for animal bedding.” Warning labels from the CCA-treated wood were found in the mulch. The EPA recommends that CCA-treated wood not be converted into mulch. The case is still pending.
• In 2005, Menards agreed to a $2 million fine after Wisconsin DNR officials found a floor drain in a company shop that they believed was used to dump paint, solvents, oil and other waste into a lagoon that fed into a tributary of the Chippewa River. The sanction broke the previous record fine of $1.7 million set by Menard in 1997.
• In 2006, the construction of a $112 million warehouse became a campaign issue in the Wisconsin governor’s race. The warehouse was to be erected by filling in a .6-acre bean field the DNR considers a seasonal wetland used by migrating tundra swans. Menards offered to build a wetland more than twice its size as a replacement, but was rejected by Scott Humrickhouse, a DNR regional director. Humrickhouse said that solution could be used “only when every alternative for saving the original wetland was exhausted.” The increasingly heated dispute got considerable media coverage, with a DNR warden calling Menard’s general counsel a “legal bitch” and the company threatening to move jobs out of Wisconsin. Tempers seemed to cool after Gov. Jim Doyle arranged $4.2 million in state aide to help the company expand its Eau Claire manufacturing headquarters. Menard had previously contributed $20,000 to Doyle’s campaign.
Also in 2006: The U.S. Environmental Protection Agency issued an administrative order against Menards for damaging a Sioux Falls, S.D., stream that ran through its property by filling in 1,350 linear feet of the stream and replacing it with a 66-inch storm sewer pipe.