owner Rick Baldelli why he got into the cigar business and his answer is one that you’re likely to hear more and more often these days: he needed a job after becoming another statistic in the dreaded “old people” corporate downsizing trend.
“Two Brothers Cigars was created out of necessity; I was a 25-year petroleum engineer veteran at Halliburton and was under the delusion that I would have a job forever, just like our grandparents did. Remember those days?” Baldelli laughs. “Once you’re 50 you become an insurance liability and a company can hire two people for your price. After I was laid off in 1998, I retrained in Microsoft technology and went to work for Verizon.” Proving that lightning can strike twice, Rick started looking over his shoulder after the next event. “I was summarily laid off from Verizon after three and a half years and the message was clear that I was going to need to work for myself.”
While there are many popular franchises and work-for-yourself jobs, the only thing Baldelli was really interested in was the cigar business. “I had a couple of severance packages which gave me some flexibility in what kind of future I wanted to pursue and when,” Baldelli recounts. “At the same time I was being laid off, my brother was pretty much on the same career path after having a business he owned bought out.”
The stage was set for a potential change of gears. “So there we were, both jobless in 2000,” Baldelli says with a smile more wistful than funny, “and one day we were walking in the downtown Plano, which has been revitalized in recent years, and my wife, who is a smart lady, makes the comment that it would be a good location to open a cigar shop.
“We started plotting strategy at that point. I had been smoking cigars for the last fifteen years and it was the only business I had the desire to pursue, although I didn’t really want to get into the retail business because I knew how much work it was to operate a retail shop.”
The Miracle of Treating People Right
If we all had a dime for every instance of lousy customer service we receive across these days, we would be rich and could buy more cigars. Baldelli knew he could succeed in the business by applying the lessons he learned from his time in “corporate America:” the customer, and real no-bull service, comes first.
“I knew I could translate my skills from the engineering world over to this environment and I’ve adapted well to retail sales,” Baldelli says. “All you really need to do is treat people right.” That approach works clear across the range of demographics at the store, Baldelli notes. “The guys that come into the shop, whether blue collar or white collar, want to enjoy a good cigar, relax, visit, read, work or play poker,” he observes. “We let them do what they want within that context and try to give them every option we can to create a better experience. We’re a man shop, pure and simple.”
The other key to initial success and growth for Two Brothers was location. “I knew less about the demographics of the area than I should have,” Baldelli says, “but the people in the cigar business I talked to agreed that the location we had identified was a good one. There were many cigar shops in this town - I knew them because I frequented them - but there wasn’t a cigar shop in this particular area. As it turns out, that was a good decision and we don’t have another cigar shop within five miles of us.”
The Blessings and Perils of the Family Business
Myriad tales have been written about the pros and cons of working with family - some good, some bad, and some downright ugly. The Two Brothers family story falls somewhere between them all.
|Store owner and co-founder, Rick Baldelli.
“My brother and I began as partners with our funds, starting out with the 1,300-square-foot shop,” Baldelli says. “We ran the shop together but after three years of that my brother realized that retail wasn’t for him and I took over the entire business in early 2005.” Retail, Baldelli notes, isn’t for everybody, and the day-to-day operation of the business can be a grind. But even as the brothers parted ways, the business was continuing to grow. By 2006, the store had become very popular, very busy, and very crowded -literally growing out of its space. It wasn’t long before Rick began looking for another location.
This was a big decision, but Baldelli had a very specific target that began with finding a stand-alone building - no wall-sharing in strip centers. “Of course, with all of the restrictions the government put on you, I was looking for a stand-alone space where we didn’t share walls and didn’t have to be subject to so many restrictions,” say Baldelli. “We discovered the building we’re in now and within about two-and-a-half months we finished the build-out and moved in.
“Of course, it was more money than we wanted to spend, but it turned out great and [just] like we wanted; it has great look and feel to it.” The space is about 2,500 square feet with a 700-square-foot humidor and a 500-square-foot lounge, more than double the capacity of the previous store. More importantly, it is highly conducive to social events like cigar tastings and poker games.
To Advertise, or Not
The single biggest factor in the continued growth of the business, according to Baldelli, is customers spreading “word of mouth” reviews of Two Brothers.
Special events have also helped, particularly Friday night happy hours and Texas Hold ‘em poker games. The rising popularity of poker nationwide has been a boon for a number of businesses including cigar shops. “We started Friday night happy hours serving food and liquor, but while that attracted customers it didn’t move the register enough,” Baldelli says. “We scaled the food and beverage offerings back, but continued to offer cigar discounts and our rolling Friday night Texas Hold ‘em poker tournaments have been a big draw. The cigar smoking poker players are terrific - from investment guys to tow truck drivers. Many of these guys are also from telecom and computer industries. They have a great time and [we] sell cigars.”
Setting the business apart from other competitors in the greater area is important. Rick Poehler, Arturo Fuente-J.C. Newman representative in the Dallas-Fort Worth area, says Rick and Two Brothers has succeeded in that respect, and more. “They have fulfilled a need in the area and have built tremendous customer loyalty,” Poehler attests. “They have a very relaxed atmosphere with a very, very large selection of cigars and they are truly customer-focused. Rick never meets a stranger and that helps - he treats people in a helpful and genuine way. He’s educated himself over the years and is willing to try new products. In addition, Two Brothers events and promotions are terrific and not to be missed around here.”
Trends Today and Tomorrow
Baldelli is seeing the major cigar brands that have marketing support selling very well, including General, Altadis, and Fuente and the more popular boutiqe brands. Smaller, vertically-integrated brands - ones that grow their own tobacco, roll their own cigars, and market their own brands - also do well because they control the entire production process.
|The 500-sq-ft. cigar lounge is ideal for store events including tastings and poker games.
“We saw larger ring gauge and stronger tobacco cigars over the last several years’ gain in popularity,” says Baldelli, “but that is leveling off and those cigars are being refined to include better flavor. There is a lot of the ligero cigar leaf still in the market.” The new cigar smokers are still smoking milder cigars, Baldelli notes, but are progressing more quickly into more complex cigars.
The Two Brothers’ plan is to stay focused on cigars, customers, and employees. “Our focus has included things like coffee over the years, and cigarette sales these days -with the new tax assessment - aren’t as attractive, so our focus is 90–95% on cigars with the balance on accessories,” says Baldelli.
Another typical retail difficulty that Rick has successfully navigated is employee relations. “We’ve had a pretty good experience with staff and have had to increase our employee numbers,” Baldelli says. “I’m open to suggestions and changes from the employees and I think they appreciate the opportunity to bring fresh ideas and have them heard. I don’t want to get sedentary in my thinking.” But like all cigar retailers, taxes and bans are never from Baldelli’s thoughts.
“In terms of taxes, Texas has a low tax structure on cigars and cigarillos, and really only punish you if you smoke cigarettes. Our city of Plano actually enacted a smoking ban, but later rescinded it because it was a detriment to tax revenues and tourism,” Baldelli explains. “These kinds of bans have had a negative effect for city economies across the state, but have been a boon for us because we are one of the last safe havens where you can legally smoke a cigar.” The bans have also led to the shutdown of a number of cigar bars - “and that is unfortunate,” Baldelli adds. “Dallas has a virtual total ban on smoking anywhere in public and yet enforcement is a joke - there is no money to have a task force to enforce the ordinance. A lot of these cities and communities are realizing that. In essence, these cities have to raise taxes to replace the revenue they lose from smoking revenues. What sense does that make?”
Two Brothers Redux?
Baldelli is reluctant to pursue an aggressive growth strategy citing a strong focus on maximizing the revenue of the store’s new location. “In the near future we want to stay stable and continue to define what we are by working on our identity,” Baldelli explains. “We’re a very attractive venue to a hell of a lot of people in town because we have an operation that is not affected by mall or strip mall rules, and I also have a very large parking lot.” There’s nothing to keep a customer from a quick or long stop, notes Baldelli, and there’s also an outdoor space for relaxing and smoking which he’s expanding into a true outdoor café setting.
“It’s a man stop with a big following and a loyal clientele,” Baldelli concludes - a perfect description of success for Two Brothers Cigars.