Authors: Ken Englade
That is not a statistic to be sneered at, not when other studies have shown that a funeral is a person’s third most expensive purchase, topped only by a home and an auto. In the mid-eighties the average cost of a funeral was $1950, which did not include the cost of a plot, a vault, or a marker. That easily added another $1200 to the cost, bringing the total to more than $3000.
Since it took time to build up a clientele, the funeral industry tended to be both stable and comparatively exclusive; not too many new funeral homes were being added, and not too many of the old ones were folding.
However, beginning in the late sixties, change began to sweep through the industry. One of the major factors precipitating this transformation was inflation. Although prices had been steadily rising all along, they took a big jump in the mid-seventies. Between 1975 and 1985 the cost of a funeral rose 95 percent.
Naturally, the escalating costs upset a number of potential customers. Sooner or later everyone
has
to use a funeral home, and as cost-conscious consumers became more interested in the financial dynamics of the industry, a new idea was born: the pay-in-advance funeral, the ultimate layaway plan. The principle had already proved successful in the retail industry, so why not transfer it to the funeral home industry?
Basically it worked like this: An individual worried that his death was going to place a major financial burden upon his survivors could subscribe to a plan whereby he or she could put something down and pay so much a month over a period of time until the whole service had been paid for in advance. This allowed that person to ease his or her conscience by not leaving loved ones with a large debt. Additionally, if that person were money conscious as well, it opened the way for a bargain. No telling what the cost of a funeral would rise to by the time the person actually died, so by paying at the then-current rates, the planner would be guarding against inflation.
This idea, which in application was called a prepaid or preneed funeral, sounded good to the funeral home owners as well. It allowed them to lock in a prospective customer, plus it provided them with a predictable amount of income. Although the money for the prepaid funeral went into a special account that could not be touched by the funeral home until the person died, there was the interest on the preneed accounts, which could, in the aggregate, be considerable.
In California the law mandated that interest on preneed accounts be totaled separately. That money, with one exception, also was sacrosanct. Recognizing that mortuaries needed to make
some
money on such transactions, the state allowed the funeral home to withdraw a fixed percentage of the accumulated interest to help defray administrative costs involved in setting up and maintaining the account. Much later this would be an important issue to Jerry and Laurieanne.
While the preneed concept seemed to be beneficial both to the consumer and the funeral home, it was relatively slow getting started. It did not hit the public with an exceptional impact until a company called Service Corporation International, or SCI, came along. The Houston-based company had made its early mark by developing the notion that funeral homes could be run like K marts. SCI’s plan was to buy small and struggling funeral homes and turn them around by using techniques developed in the retail discount-house industry. For example, supplies such as caskets and embalming fluids could be purchased more economically in bulk. SCI could make even more money if it manufactured the products itself, which it did in some cases. But SCI’s plan did not limit the company’s offerings to supplies. It also opened florist shops, since flowers are a big-demand item at funerals, and it offered consolidated services.
The nature of the death business demands that a funeral home have someone on duty twenty-four hours a day. Whenever a call comes in to go pick up a body, someone has to be there to answer it. Similarly, someone had to be available to perform the embalming and see to the routine tasks such as collecting death certificates. SCI said it could provide a central agency to take care of these tasks for several funeral homes, thus freeing the homes from individual financial obligations.
Another major expense for funeral homes was vehicles. Each funeral home had to have a fleet of vans or station wagons to pick up bodies, for example, and another fleet of fancy vehicles—hearses and limousines—to use at funerals. This was an expensive operation. What SCI proposed was a central vehicle pool whereby it could provide vehicles to several funeral homes.
In the end SCI offered a broad menu of services, ranging from low-cost caskets and centralized transportation to economical burial in SCI-owned cemeteries. But the real genius of the SCI plan lay in its buy-out offer. Realizing that a good reputation was worth its weight in gold, SCI did
not
propose to open its own funeral homes or put an SCI sign on the doors of the homes it bought. Rather, it retained the name of the original owner in order to take advantage of the goodwill that had been built up over the years, sometimes for generations. As far as the public was concerned, the home had not changed hands. Many times, the previous owner was kept on as manager.
SCI also proved very aggressive in promoting its concepts. While it began by buying funeral homes one at a time—specializing in businesses out of the big cities, targeting instead homes in smaller cities, particularly in the Sun Belt—it made a major leap forward in 1971 when it purchased a network of twenty-six funeral homes owned by a company called Kinney Systems. It made a larger jump in 1981 when it purchased IFS Industries, its only major competitor, for $48 million. In return, SCI got ninety-one more homes and twenty-two cemeteries.
It did not take SCI long to tumble onto the preneed possibilities as well. Since selling preneed plans by individual funeral homes was a slow process, SCI decided to form its own insurance company, which it called Memorial Guardian, which would handle preneed accounts on a national basis. A purchaser of a Memorial Guardian preneed account could take his choice among SCI-owned funeral homes and would not be restricted to one specific funeral home, as dictated by the ordinary preneed account. This idea proved wildly popular; at one time SCI’s preneed accounts totaled nearly $1 billion dollars.
Although several years later it decided to strip itself of many of its enterprises, electing to sell off its supply division, its insurance business, and its florist shops, it continued to hold on to its funeral homes and its cemeteries. By 1990, SCI owned 551 funeral homes and 122 cemeteries in the United States and Canada. Although the total number of funeral homes owned by SCI were only a fraction of the 22,000 homes around the country, the
concept
it promoted ensured that the industry would never be the same again.
The significance of these changes in the industry had not been lost on Jerry Sconce. After his sporting goods store closed and he went to work full-time for Laurieanne, he took over the handling of the preneed accounts, which Lamb Funeral Home had started selling when they saw the possibilities the plans offered. Since Jerry was a born salesman anyway, the transition from coaching and owning a small business to peddling prepaid funerals proved fortuitous. He not only enjoyed it, but he was good at it. Jerry sold a lot of preneed accounts.
Ever receptive to innovation, Jerry also became fascinated with another important development affecting the funeral home industry: the increased demand for cremation.
While this phenomenon may not have begun in California, the state was one of the major areas affected, a fact that probably had much to do with the background and disposition of Californians. A large number of them had come west, as had Charles Lamb, from other areas of the country. When they died, their survivors became increasingly hesitant about spending large sums of money to send their bodies back east, or in using funds for expensive funerals in California when most of the people who might visit the graves were in the nation’s midland or on the opposite coast.
The increased interest in cremation also may have had something to do with the state’s skyrocketing land prices. To many it seemed a waste of valuable land to take over a large parcel for a cemetery. Rather than burying someone in the land and using a sizable plot, it seemed much more practical, from an environmentalist’s point of view, to simply burn the body and keep the remains, which were called “cremains,” or spread them in some scenic area.
David and his father discussed this public swerve toward cremation. David was just as fascinated by the trend as Jerry, mainly because he had the opportunity to observe the results firsthand. While making his rounds to retrieve bodies for Lamb Funeral Home, David found that more and more often the bodies he had been sent to collect were tagged for the ovens rather than the embalmer.
What David and Jerry were learning from personal observation was abundantly backed up by statistics. According to industry figures, up until 1968 only 4.1 percent of the roughly two million people who died every year were cremated. But the ratio had changed rapidly, especially in California. And it would change even more. By the mid-eighties some 34 percent of all deaths in California would result in cremations, roughly 71,000 per year. Only three states—Hawaii, Nevada, and Washington—had a higher percentage. But since California was the country’s most populous state, what happened there was significant.
Jerry locked in on this trend. Cremation, he predicted, was about to become a big business indeed. And who in Southern California, he asked David, was more ideally positioned to cash in on it than Lamb Funeral Home? David grinned. “Nobody,” he replied.
At some point early in 1982, David sat down with his parents for a serious discussion about his future. Look, he explained, he was only minimally interested in finishing embalming school. Even if he plodded ahead and got his license, he would be just another laborer, just another guy drawing hourly wages for a limited salary. That was not the route to big bucks, not for him and not for his parents.
Jerry nodded his enthusiastic agreement. He knew that David was not very happy in embalming school and he felt his talents could be put to use in a more creative way. Why didn’t he, Jerry asked David, consider starting a cremation service?
David’s eyes lit up. “Exactly!” he said.
However, what Jerry and David were proposing went considerably beyond the services that Lamb Funeral Home was then offering. Although it was one of the relatively few funeral homes that did its own cremations—thanks to the purchase of the Pasadena Crematorium some six decades previously by Charles Lamb—it had not, up to that point, aggressively sought cremation business from other funeral homes. If a customer came in to see Laurieanne and said he or she wanted a loved one cremated, Lamb’s was willing to handle it. But that was about as far as it went. What father and son were proposing was that Lamb’s actively seek bodies for cremation; go around to funeral homes that did not have their own crematoriums and offer to incinerate their bodies for them.
David suggested that this would be a great enterprise for him since he had made a number of valuable contacts in the months he had been driving hither and yon picking up bodies. He could use those contacts to build a base for the new service.
This thought greatly excited the family. It fed David’s entrepreneurial ambitions and it helped Jerry and Laurieanne put their older son on a career track. If done correctly, David reasoned, he and his parents could extend the business beyond the immediate geographical area. In his imagination, they could even corner the cremation business in Southern California.
A few days after Jerry made the suggestion to his son, David came back with a plan. How much, they had asked, would he suggest charging for the service? David had an answer: $55, he said, which would include picking up the bodies and returning the remains.
They shook their heads. The few others who were doing similar work, they pointed out, were charging twice that amount, which was still a good deal for the funeral homes who were engaging the services since they could, in turn, charge the customer as much as $1000. But at $55 they figured they would be losing money. Their facility, Pasadena Crematorium, had only two ovens. Since, depending on the efficiency of the oven, it took about two hours to cremate a single body—about one hour burn-time then another hour for the oven to cool down enough to remove the remains—they could process, at best, twenty-four bodies per day. That would bring in an absolute maximum, without allowing for down-time, of $1320 per day. But if they were running twenty-four hours a day then they would have to hire additional workers and that would eat into the earnings. To Jerry and Laurieanne, David’s fee proposal did not seem like a money-making proposition.
David took issue with their assessment. Who was talking about cremating just one body in each oven? he asked. What if he cremated more than that? What if he jammed the ovens and could do maybe five or six in each oven at one time? That would work out, at $55 per body, to about $660 per load, using both ovens.
Of course, what David was suggesting was both illegal and unethical. When next of kin asked a funeral home to cremate a body, they had a right to expect that the remains they received were actually those of the loved one. But if several were to be cremated at one time, there would be no way to separate the remains, no way to assure the customers that the remains they received were indeed those of the loved one. How about that? Laurieanne asked.
How about it! David replied. “How can you tell if the remains are mixed? Anyway, what difference does it make. They’re dead.”