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How a small Tennessee flag business carved out a market too large to handle

USA TODAY logo USA TODAY 06/12/2018 Cassandra Stephenson
The Rustic Flag Company, founded in 2014, creates hand-crafted wooden American flags. The company saw popularity of their product skyrocket early, but is now struggling to keep up with backlogged orders. © Provided by USA TODAY, a division of Gannett Satellite Information Network, Inc. The Rustic Flag Company, founded in 2014, creates hand-crafted wooden American flags. The company saw popularity of their product skyrocket early, but is now struggling to keep up with backlogged orders.

JACKSON, Tenn. – Army veteran Justin Scott started his business in a Tennessee garage in 2014 with the intent to sell detailed, hand-crafted wooden flags and employ fellow veterans.

Within three years, the Rustic Flag Company was pulling in $8 million in sales from around the nation and employing 54 people, mostly veterans and family members of veterans. The business expanded at a rapid rate – too fast, Scott now says. 

Soon, those 54 employees were working 84-hour weeks, and costs skyrocketed due to overtime and payroll taxes. Scott found his company struggling to keep up with orders, and late delivery complaints mounted. Eventually, he stopped accepting new purchases so he and a bare-bones team could focus on filling all the outstanding orders.

"I was at a point where I said, you know, I can keep this big shovel digging, and keep selling orders and be fine for another couple of years, and keep dealing with being behind, but I don't want to be that way," Scott said. "Eventually, it gets to a point where I'm going to be selling a flag that I know I can't send out. And I didn't want to do that."

The Rustic Flag Company has shipped about 112,000 orders since it opened for business in 2014. They've sold about 135,000 flags. Scott said he and his team currently have about 10,000 orders behind on production and another 10,000 that are not late – yet.

With no more capital coming in to offset mounting production and shipping costs, Scott has pared back his team to about eight people. They are now working as fast as they can to fill as many orders as possible, he said, or provide refunds to those who don't want to wait. 

"I'm going to do everything I can to float it for as long as I can, to be an honest person and get everybody's orders out, (and) not worry about trying to take in any more money," Scott said.

The Charred Betsy is a rustic interpretation of the original flag of the 13 colonies. © Photo courtesy Rustic Flag Company The Charred Betsy is a rustic interpretation of the original flag of the 13 colonies.

The waiting game

Even when the Rustic Flag Company was at peak production with a full staff, hand-crafted wooden flags take time to make. The company's website, which now bears a large message on its homepage explaining that no new orders will be accepted, also states that its handmade products have a lead-time of several weeks for production.

All items sold have a lead-time of 10 to 12 weeks, the website states, and custom items, military artwork and the company's trademarked "split flags" take as long as 14 weeks to create and ship.

But with the overwhelming demand and now-short staff, these wait times have stretched from weeks to months, and Scott said he's reluctant to guarantee customers an exact delivery date for fear of disappointing them again. 

In the meantime, customers are getting worried. Scott said his inbox is full of thousands of emails. Thousands more comment on the company's Facebook page. The Rustic Flag Company's Better Business Bureau page now shows an "F" rating due to more than 300 complaints about late delivery.

Scott says he does read his emails and frequently goes through all the comments on Facebook, but responding to all the inquiries while trying to fill all the orders has become nearly impossible.

"I really want to do the right thing in this whole deal, I absolutely do," Scott said. "If I could afford to have people poring through emails every day and trying to communicate with every single person on there, I absolutely would. I just don't have the funds to pay anyone additional."

Social media has become an especially volatile place for Scott. At first, he tried to respond to Facebook posts, but his replies drove an increased frenzy of comments, misinformation, complaints and requests, he said.

"From the outside looking in, I look like somebody who is attempting to ignore people, and I'm absolutely not," Scott said. "I go over my Facebook (notifications) every single day. But I know the more activity I drive by replying to people on there, the crazier it gets."

Rob Scarpa, a customer from New Jersey, is one of hundreds who commented on a post Scott made in October attempting to explain the delay in orders. Like several other commenters, Scarpa wrote he had to wait for the flag he ordered but that he was elated with the product when it arrived.

Scarpa told The Jackson Sun he ordered a large American flag and received it about six months ago, a few weeks later than the expected delivery date. It now hangs in his office, and he said he couldn't be happier.

"It's gorgeous," Scarpa said. "It's well worth the wait. It's probably the best craftsmanship that I've seen in terms of anything that I've ordered custom-made."

Scarpa said he recommended the company to at least 10 of his friends and family, who also received their products up to six weeks late but were very pleased with their quality once they arrived. While Scarpa said he understands why people are concerned, he noted that all his friends and family who ordered from Rustic Flag Company have received their purchases within the last six months, and he still holds the company in high esteem.

"It's wonderful," Scarpa said. "I mean, it's a veteran-owned company. I'm proud to be a customer of theirs."

Ed Clark, another customer from Colorado, said he has not heard back from anyone at the company since August. A veteran himself, he ordered a flag with a Military Police regimental crest to commemorate the service of both him and his son. He said the flag cost him about $250, and the company was up-front about production taking up to 15 weeks. But when they stopped responding to his phone calls and took down the phone number on the website, Clark said he started to get nervous.

"I'm a retired cop, so I got nervous that my money was just gone," Clark said.

a sign on a wooden surface: Pledge of Allegiance flag features hand painted script on American spruce. © Photo courtesy Rustic Flag Company Pledge of Allegiance flag features hand painted script on American spruce.

Scott said he understands that some customers might not want to wait to receive their products, and said he's doing his best to give full refunds to any customers that request them. So far, the Rustic Flag Company has issued close to 3,000 full refunds.

Clark said he would rather have the flag he ordered than get his money back because of the significance of the memento for him and his son.

"I don't mind, I would really like a flag more than I would like to make life tough on them," Clark said. "But it has been a long time."

a close up of a painted wall: Tribute to the hardcore American Marine Corps. © Photo courtesy Rustic Flag Company Tribute to the hardcore American Marine Corps.

A perfect storm

Scott did not expect any of this, he said.

He served in the Army and paid his wife's way through nursing school. His wife worked as a nurse once she graduated to pay his way through school to be an engineer. When he graduated, he made his first flag in his garage, which was purchased by a friend. More friends were interested and Scott's flags quickly grew a following on Facebook. He suddenly had a full-fledged business on his hands and a family with four young children.

The business quickly began pulling in orders and money. In its second year, they took in $5.5 million in sales. Scott took some of that revenue and bought a new building, along with new machines, to make production of some of their products easier.

As the popularity of the wooden flags grew, competition in the market expanded as well, Scott said. He tried to patent his designs but was unsuccessful, and some companies were offering less expensive flags. The Rustic Flag Company ran promotions to boost sales, bringing in more money that could be used for additional machinery and contract artists, Scott said. 

Suddenly, with an influx of orders, Scott's staff was working overtime to meet demand. 

"The budget completely flipped upside down on its head," Scott said.

He paid out of pocket for additional overtime costs and payroll taxes. He said he couldn't get a line of credit to float the operation long enough for him to stop taking new orders, which would allow the company to catch up.

"It's such a tremendous example of a rise and fall, and how expansion or scaling can kill you," he said.

Scott cut his staff down to bare bones and they kept producing flags. At one point, he and his team were creating 1,000 flags each week, which cost about $25,000 per week in shipping charges, Scott said. They weren't taking any more orders, so they weren't bringing in money to pay for that.

"We were just pouring (money)," Scott said.

Two of Rustic Flag Company's contract vendors that owed large amounts of money delayed their payments. One that owed $80,000 eventually admitted they would not be able to pay their bill. Scott said he worked out a payment plan with them, but it meant that Rustic Flag Company was struggling to pay their mounting $50,000 UPS shipping bill. 

Soon, the Rustic Flag Company was also in the red on PayPal and Shopify, two payment platforms used to process orders, which forced the company to temporarily pause issuing refunds.

Scott has been using any money he can find to keep the operation going, including borrowing from RFC Tactical, his other business. 

At one point, he said, he was forced to consider his options, including declaring bankruptcy.

"I kept coming back to, I owe people a product that I know they love and I'm going to put everything I have into it ... and that's what I've been doing," Scott said. "And it hurts."

Scott said he's determined to try to fill all the outstanding orders Rustic Flag Company has but he doesn't plan to take any more orders after that.

"I hope that people will just understand ... you can't tell somebody that you want to be a good person," Scott said. "Nobody just believes someone that they don't know. But we definitely want to try to make sure that we take care of everyone, and we want to do the right thing."

Scott said he could have thrown in the towel long ago and declared bankruptcy, or continued to sell flags knowing that he could never fill the orders.

"I had those options, and I weighed them out, and I feel like I've learned enough in my life, and I've been around enough, that I'm not going to ever make an attempt to defraud anyone," Scott said. "I want to do the right thing, and this is what I keep coming back to. That's what I'm going to keep doing."

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