Park City Group Inc. (PKCY-OTC:BB)
Interview with:
Randall Fields, Chairman and CEO
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end-to-end computer software solutions that help its retail customers to increase their sales while reducing their inventory and labor costs.

 

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Park City Group delivers to the supermarket and convenience store industries an end-to-end solution to improve quality and availability of perishable products while decreasing shrink and increasing profitability

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Technology
Software and Programming
(PKCY-OTC: BB)

Park City Group Inc.

333 Main Street, PO Box 5000
Park City, UT 84060

Phone: 435-649-2221


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Randall Fields
Chairman and CEO

Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
July 14, 2005

BIO:
Randall K. Fields

____________________________________________________

Personal Biography
Randall K. (Randy) Fields is Chairman, and CEO of Park City Group, Inc. a   technology development and consulting services company based in Park City, Utah. Delivering software solutions to the retail market, the company has customers that are recognized retail leaders both domestically and internationally, such as The Home Depot, Victoria’s Secret, Williams-Sonoma, The Limited, Tesco Lotus and Anheuser Busch Entertainment. Fields career reflects his strong entrepreneurial skills. Initially leveraging his educational experience, in the early 1970’s, Fields established a financial and economic consulting firm called Fields Investment Group. He then co-founded Mrs. Fields Cookies with Debbi Fields, and served as its chairman from 1978 to 1990. Known for the innovative use of technology to operate the business as it grew, Fields and the Mrs. Fields Cookie operation were featured in a Harvard Case study that is still used and referenced in business schools today. Fields demonstrated his skills in international business development as the Mrs. Fields brand expanded to more than 800 locations. His knowledge and creativity in product branding led to the development of the unique branding characteristics for the newly emerging sweet treat market. Based on the acclaim surrounding the Mrs. Fields Cookies business, Fields’ use of technology in operating business environments, and the effectiveness of the software in producing benefits and results.

He founded Park City Group in 1990 and expanded his entrepreneurial skills with the co-founding of Captiva Software, today a $50 million company listed on NASDAQ. Randy and Debbi co-founded the Mrs. Fields Children’s Health Foundation and served as Directors for several charitable institutions, including the Primary Children’s Hospital and the LDS Hospital in Salt Lake City. He is a contributing editor to Chief Executive Magazine, and has written extensively on the subject of using technology to solve business challenges. Articles regarding Fields’ concepts, companies and products have been featured in business publications such as Forbes, Business Week, INC Magazine, The Wall Street Journal, Management Review as well as computer and trade magazines including Computerworld, Information Week, PC Week, Network World, Datamation, RIS News and Chain Store Age Executive.

Fields holds both bachelor and masters degrees from Stanford University, where he was a Phi Beta Kappa, Danforth Fellow and National Science Foundation Fellow. Today, Fields shares his expertise and the collective experience through consulting and speaking, interviews and guest lecturing engagements both in the retail industry as well as in the general business environment.

Company Profile:
Park City Group, Inc. founded in 1990, develops and markets patented end-to-end computer software solutions that help its retail customers to increase their sales while reducing their inventory and labor costs: the two largest, controllable expenses in the retail industry.

The technology has its genesis in the operations of Mrs. Fields Cookies, co- founded by Randy Fields, CEO of Park City Group, Inc. delivers comprehensive software solutions for retail operations to its impressive, and continually growing, user base. Customers are rapidly deploying and licensing additional software for their multi-location businesses.

Park City Group, Inc., (OTCBB:PKCY, Berlin: WKN# 924919), headquartered in Park City, Utah, became a public company in May, 2001, and began expanding its market share within the grocery and specialty retail sectors. By uniquely leveraging its expertise in retail operations management, and state-of-the-art patented technologies, the Company facilitates the planning and execution of complex business processes. In addition, it delivers timely, relevant, and "actionable" information. Park City Group helps improve its customers' profitability by putting the "best manager" in every store. The Company uses a customer-centric focus by measuring its success by the success of its customers.

Fresh Market Manager and ActionManager at Work:
The Company is gaining recognition within the supermarket/grocery segment for its Fresh Market Manager applications which are a fully integrated management solution for bakery, deli, food service, meat, seafood, frozen, floral and produce departments. Fresh Market Manager delivers cost savings and increases sales, enabling grocery chains to survive the fierce competition created by value retailers. The product helps grocers to achieve improved economic performance.

Together with its ActionManager solutions, Park City Group delivers one of the most robust integrated business solutions available in the industry. The systems address operations management tasks, including: item level category management, inventory and production planning, work flow, scheduling, forecasting, interviewing applicants, generating supply orders, producing sales reports/projections, administering skill tests transmitting, and assessing employee knowledge. Until recently, the Company has focused on the domestic retail market, and is now positioning itself for international market penetration with its patent pending quick switch language support.

Technology Strategy:
Park City Group's Research and Development organization adheres to a strategy that leverages the key technology requirements while supporting existing technical environments. The company believes that just using the latest and greatest technology is not good enough when it comes to developing innovative software. It takes:

Commitment to an "open" environment
Use of tools to allow for simplified tailoring
Maximum flexibility to support all types of communications
Architecture that supports consistent, reusable, development tools
Adaptation to changing business requirements/emerging technologies
Support of low bandwidth communication and high speed environments
Combining environments in today's complex, multi-location operations 

CEOCFOinterviews: Mr. Fields, what was your vision when you started Park City Group, and what is it today?
Mr. Fields: “My vision over time has evolved a bit. Our technology comes out of our experience with Mrs. Fields Cookies. What we believe was an essential ingredient for retailers was the ability to be keenly focused on the business. What that means is, at store level, they have to be able to better control the two only true controllable costs that retailers have: the cost of their inventory and the use and training of their people. We have developed technology to enable retailers to substantially improve their cost and revenues to the better management of inventory and the human resource aspect of the businesses.

The idea was to take the same lessons that we had learned in our Mrs. Fields experience and couple that with our technological expertise that was developed in the context of our own retail business and sell that to other retailers on a worldwide basis. What has evolved in the last two years is a significant change in two industries in retail, the convenience store industry and the supermarket industry. What has happened is that the inexorable pressure that comes from value retailers like Wal-Mart, Costco, Sam’s Club and the like has put both of those industries in the position in which they have to substantially increase the availability of perishables, meaning fresh food. Today’s supermarket world is becoming a fresh food dominant kind of business. The convenience store industry, which used to have mostly beverages and ready made quick foods are now evolving to fresh hot breakfast items, soups, salads deli and gourmet sandwiches. Both of these industries have turned to us and are addressing the problem of how to better manage their perishables. In the past two years there has been an increased awakening of this sleeping giant of a problem, which is perishables-are-the-future, but we are not very good at managing them. The retailers question is how do we find help.”

CEOCFOinterviews: How does Park City help them control perishables?
Mr. Fields: “What we do is offer the convenience store and supermarket industry an end-to-end solution that enables them to better control the availability of their perishables, to reduce the amount of the perishables products that are called ‘shrink or waste’ and to increase the availability at the appropriate time for customers. This comes directly out of our Mrs. Fields experience where we had cookies that had to be thrown away after two hours if they were not sold. We have taken that same technology and we help bakeries, delis, as well as meat, seafood and produce departments so that customers have better products available just when customers wanted it so think of it as a just-in-time inventory system across the perishable offering.”

CEOCFOinterviews: What is unique about your software?
Mr. Fields: “I think at the moment, we are fortunate because there isn’t anybody else that has to scope and depth of what we offer and they cannot do it on their own. It is hard to do a perishable inventory system. If you are trying to do inventory, for example, with tomato paste, tomato paste comes in the back door in a case of 24; it stays in cans and then gets put on the shelf. Let’s take something like flour, which is perishable, flour comes in the back door and flour might become French bread, wheat bread, sour dough bread and then the bread might become garlic bread or part of a sandwich or be sold as a loaf. The difference in the inventory systems and complexity associated with perishables is incredible. It has been a complex effort for people to develop them.

We are, to the best of our knowledge, the only fully integrated category management, in-store production planning, forecasting and computer aided ordering system available for perishables available anywhere today. Now that supermarkets and convenience retailers are focused on the problem, they have to find a solution. For example, supermarkets cannot tell you their true cost of goods on any perishable item. When they sell you a loaf of bread that they make in that bakery, they actually do not know how much it cost them to do it. How scary is that? We can, however, tell them that through the use of our Fresh Market Manager solution.”

CEOCFOinterviews: Do the stores know you exist?
Mr. Fields: “We have been relatively quiet about what we have done in the industry. Our theory was to get ten or fifteen customers on the system and have them tell the world that we are great and that we are helping them to be successful with products. We currently have seven customers using that technology, and all of them will say that we are doing a great job for them and that the technology works. My hope is that by September of this year, we will have twelve or thirteen of them fully operational; we think that is the tipping point. Recently, AMR Research published a study that said, ‘this whole area of fresh item management is the last frontier for the supermarket industry; that it is the most profitable investment that the supermarket could make today.’ For example, they indicated that you could save a $100,000 a year per store by using this technology. The volcano is starting to awaken and it is starting to rumble a bit. Not enough people know about us yet; we are scaling the business up and we need to ramp up our marketing efforts. As the industries wake up and we continue to be successful in working with our existing customers, we suspect the word will spread.”

CEOCFOinterviews: Who is your target customer and how do you reach them?
Mr. Fields: “The way this industry works is that it is very ‘clubby’. We have an individual that working for us on a part-time basis that has tremendous experience in the industry, he was CEO of two different well know supermarket chains so he knows most of the senior executives. We also do presentations at tradeshows, so gradually the word is getting out. This message is being hear in the home office and very high in the organization. For the C-Store (convenience store) industry, we are attending more of the trade shows and we are working with some of the share groups, which are non-competitive groups of convenience stores that get together and talk about interesting opportunities; we think our solutions should be one of those opportunities. We are now beginning in earnest to focus on the marketing side of business to get our name out to people. We just had one of our customers, Wawa, Inc., one of the most successful C-store chains the in the world, that just gave a presentation on how successful our technology has been for them. They spoke to the supermarket industry at a tradeshow last weekend.

Our customers are beginning to talk about us and we have two customers lined up to give presentations at two more tradeshows in the upcoming months. Here is another example, a year ago, when directors were surveyed this idea of addressing the fresh item management problem, it was not in the top twenty list of possible projects, but now it is number eighteen of possible projects that IT directors in the supermarket industry will do. We have gone from nowhere to number eighteen. If I were a betting person, I would bet that with the effort we have underway, next year it will be in the top ten and the following year it will be in the top five. What that means is the job of the market leader is to awaken the sleeping giant, let them know what the problem is and how the problem can be solved and what the economic benefits are. That is my job, to get out in the world and tell people that.”

CEOCFOinterviews: What are you doing on the other side of the business?
Mr. Fields: "The other side of what we do is called, ActionManager and that solution addresses things relate to people, workflow, labor scheduling, and information management. We are approaching that channel through alliance partners. We have done a deal with CRS Retail Systems, a large point-of-sale vendor and we are looking to do this with other vendors who will take this ActionManager product line into other vertical markets of retail so that we can focus on the Fresh Market Manager solution for convenience stores and groceries. We just do not have the scale of resources in the company that would let us successfully focus on multiple markets.. We hope to have a very significant and well-known name as a strategic partner in selling Fresh Market Manager to announce here shortly. This is someone that will give us tremendous credibility and will take us into their worldwide accounts.”

CEOCFOinterviews: You have some well-known customers on that side of the business!
Mr. Fields: “Yes, we do; customers like The Home Depot, Inc. (NYSE: HD), Williams-Sonoma, Inc. (NYSE: WSM) and Victoria’s Secret. If a company is judged by the company it keeps, then we are humbled by the list of customers we have. We are very lucky that names and companies like this have long-term relationships with us. Hopefully, it is a testimony that we care about our customers’ profitability and we work with them and show them how to use the technology. We are really retail consultants. I think that is what has helped us so far.”

CEOCFOinterviews: How much customization is involved on your fresh food side?
Mr. Fields: “We do not really customize the code; we have written a rules-based technology that adapts itself to anyone’s world. There is a set-up process where we define how the systems will be used in that specific customer environment and we also connect all their legacy systems like point-of-sale and general ledger to our applications. We have developed something that we think is extraordinary in the world of enterprise systems. We can be up and running in less than forty-five days, which is a remarkably short amount of time for a technology project. We built it so that it would be up and running quickly and they could get the economic benefits of using the technology. We then work with the customer more on a consulting basis to show them how to use the tools and how to make decisions that work up and down the business. Increasingly, we are moving to a recurring revenue model and away from licensing. We have a hosted option for smaller chains where instead of selling them the technology, we actually host it on our own servers, run it for them and charge them a monthly fee. A great deal of consulting activity goes on when we show them how to use it.”

CEOCFOinterviews: Can you tell us a little more about your revenue model?
Mr. Fields: “Our basic revenue model is selling this by the department, by the store. In theory is that you have 100 stores and you want to start in bakery, you acquire 100 bakery licenses from us. If the customer tries it in bakery for six months to a year and thinks its terrific and decide they want to put it in their deli, they come back and acquire 100 licenses and put it in their deli. They then say that it is great and acquire 100 licenses for produce. It is a very interesting revenue model because in a sense it is like an insurance model. Each year we anticipate our customers will come back and buy more. It works the same way on the hosted basis; if we charge them the monthly fee, which makes it much less expensive for them from the front-end to get into this, each year we anticipate that they will come back and add one more department.

We are hoping to build a strong, powerful recurring revenue model. The short-term impact is that it hurts our top-line and bottom-line because instead of getting large lump-some one-time fees, you are now stretching that over time. Internally we are very pleased with our progress. I think this year is going to show a very substantial switch from one-time revenues to consulting and recurring revenue models. We anticipate next year that we will see an acceleration of that. We are exciting because we are building a long-term revenue stream as we do this and tremendous customer relationships. Our customers are using this product and that is the best measure of how we are going to do. All are willing to stand up and say Park City Group is a great company to work with, they have helped us, the technology works, but overall it has been a terrific relationship. That is how you open the door to strong long-term business.”

CEOCFOinterviews: The perishables are increasing so you have many years ahead for your plan and growth!
Mr. Fields: “Absolutely! Last year, perishables were 51% of the total sales of the supermarket industry. More than half of all of the business comes from the sale of perishables and there are no comprehensive perishable control systems available, that we are aware of, except ours. As a result, the more that value retailers become a threat, the more that supermarkets are looking to perishables as their future salvation, and that plays right into the need to control what they are doing, and by definition, that strengthens our hand.”

CEOCFOinterviews: Will you tell us about the financial condition Park City Group?
Mr. Fields: “Each of the last several years, we have had top-line revenue growth and improvement in bottom-line so it is all moving in the right direction. The switch from the license sale of the technology, to this recurring model, is going to slow our top-line growth a bit because instead of selling something for $500 thousand dollars for example, you would now get a recurring revenue of a one hundred thousand dollars a year for a number of years. In the first and second year of doing this, it impedes or hurts your top-line growth. We think the tipping point of acceleration is somewhere between ten and fifteen customers that are up and able to be referenced. We currently have seven and I would anticipate that by September we will be past ten in number. We have already seen substantially increased interest in the market place in which we are serving. It is never easy but it is getting easier. The current year should, we certainly hope, be the transition year to this increasing recurring revenue model. If 2005 is the transition year we are hoping for, then 2006 should be a year of much stronger results both in revenue, earnings and, more importantly, existing customer and new customer acceptance.”

CEOCFOinterviews: Why should potential investors be interested and what should they know that perhaps is not readily apparent when they first look at the company?
Mr. Fields: “I think there are two or three things that are significant and I would strongly encourage an investor to do thorough due-diligence before they make an investment with us. We have a good webpage and we have excellent frequently asked questions for people to look at. We try to make ourselves as transparent as we can to the investment community. I think the key things are: first, do you think there is a problem out there? In other words, is the supermarket and convenience store world moving toward more perishable products? Second, how do they control it, and how are they going to make money in perishables when they need control systems. Third is who has the best product control system for doing that? If you have answered those questions, we have become a very logical contender for the investment dollar. The next question you might ask is how strong is the management team and I think that as people go to the website or look at our filings, they will find that we have an incredibly experienced retail management team. I have had a modest degree of success in my life with Mrs. Fields. Our new president Jim Horton was president of Worldwide Chain Stores, which was acquired by IBM in the mid-nineties. He has run the retail consulting practice for KPMG, he was an officer and director of Kurt Salmon and Associates Inc., the largest retail consulting firm in the world. He is now our President and COO. If people look at this I think they will agree that this is a strong team. The next question is what the growth potential is and we are certainly excited. We internally agree that there is an enormous growth potential. It is going to take some patience and I think people have to understand the story well. I think it holds up well under due-diligence.”

CEOCFOinterviews: In closing, what would you like readers to remember about Park City Group?
Mr. Fields: “Every time you hear about Wal-Mart or Costco or Sam’s Club, think Park City Group because we are the answer for successful supermarket competitiveness.”


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“Today’s supermarket world is becoming a fresh food dominant kind of business. The convenience store industry, which used to have mostly beverages and ready made quick foods are now evolving to fresh hot breakfast items, soups, salads deli and gourmet sandwiches. Both of these industries have turned to us and are addressing the problem of how to better manage their perishables. In the past two years there has been an increased awakening of this sleeping giant of a problem, which is perishables-are-the-future, but we are not very good at managing them. The retailers question is how do we find help.” - Randall Fields

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