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AFA Protective Systems Inc.: Rely on the Old, Add in Some New

The oldest central station in the country turned 140 years old this year. We now know it as AFA Protective Systems, Inc. based in Syosset, N.Y.

AFA’s customer mix breaks down roughly at 80 percent commercial and 20 percent residential, with a strong concentration of fire alarm. The company now counts approximately 450 employees, 17 branch offices and three central station facilities — in N.Y., N.J. and Georgia. AFA is currently ranked 21st in the SDM 100, with monthly recurring revenues at about $2.6 million and annual revenues of approximately $75 million.

Entering its third generation under current ownership, the company has maintained a balance of new ideas and tried-and-true methods. For most its first century, AFA was owned by the Grinnell Company.  In 1967, the high profile industry antitrust case against Grinnell forced its divestiture of AFA (as well as of ADT and Holmes Protection). Shortly thereafter the Kleinman family, headed by Philip Kleinman, acquired a controlling interest in this publicly-traded company. His sons, who have been with company since the early 1970s, Robert and Richard Kleinman, are now chairman/chief executive officer and president/chief operating officer, respectively.

The arrival of David (Robert’s son) and Jared (Richard’s son) within the past five years has served to re-energize many within the company with their fresh ideas. “Recently, the next generation has come in,” Kleinman told SDM. “David, now a vice president, has taken over most of the legal work and is involved in overseeing the operations of the company. Jared has gotten involved in an area that up to now the company has not been strong, which is marketing and web presence.”

While a 140-year old track record is something many marketing directors would kill for, today’s customers want a combination of reliability and innovation, including how they can interact with their service providers online. “Our marketing was kind of old-line,” Kleinman noted. “We used to do pamphlets, brochures, yellow page ads. We did have a website, but it was more informative than user-friendly.” Last year, the company launched a new website that allows users to request information, change emergency notification instructions, pay their bill, request service, see their account activity and a number of other functions that customers want to know are available to them as they shop for a security, fire, access or CCTV system.

The process of overhauling the website was time- and resource-consuming, Kleinman shared. “We needed to change our accounting system. We had to change a whole host of systems in order to get the website to be interactive with our in-house accounting and central station systems. And we didn’t have anybody dedicated solely to overseeing the website design. Jared joined us in the middle of that process. And one of the first things Jared did, along with David’s involvement and others at AFA, was get the new website up and running. We launched it about a year ago.” This was just one of the benefits of getting “the next generation” involved, Kleinman noted. The company also re-invested the dollars they used to put into the Yellow Pages into search engine marketing (SEM), search engine optimization (SEO), email blasts and social media to ensure they reach the right people. “That’s the kind of ideas and energy the next generation will bring in as we oversee them to make sure we don’t revisit things we tried in the past and we know will not work.” Kleinman said. “It’s a nice give and take of innovation and experience.”

Under this family leadership, the company faced and met many challenges over the past forty plus years. Early on, these included protecting its customer base from predatory competition (an ongoing priority) and relieving the company of restrictions imposed from the antitrust decree (accomplished in 1981). The Kleinman family ownership also changed the company’s culture to enable it to offer additional services. Towards that end the century-old name of the company, Automatic Fire Alarm Co., was changed in 1970 to AFA Protective Systems Inc. to reflect the company did more than fire alarm while retaining the link to its roots.

To build its integrated systems, the company works with a large number of vendors. Notifier is its primary provider for fire alarm equipment. While for alarm communications, the company turns to Bosch, Honeywell and DMP.

“We’re kind of a mirror image of where the rest of the industry might be,” Kleinman explained. “Most people do burglary and a little bit of fire. AFA is primarily commercial, as opposed to residential — though it does have a residential presence in certain markets in North Carolina and Georgia. In the Northeast, our business is and has always been primarily commercial.”

During the past twenty years AFA has been able to focus its attention on other worthwhile ventures.  Starting in the 1990s AFA expanded beyond its century old Northeastern United States region and opened up offices throughout the entire Eastern seaboard as well as established a now thriving National Accounts division. It has also championed causes on behalf of its customers.  Most notably, AFA fought the New York City Fire Department’s onerous fees levied upon central station companies and after many years of litigation was successful in recouping some of those fees for its customers. AFA has also demonstrated excellent relations with its employees. Not only does the company have an inordinately high percentage of long term employees, but in 1995 its New York/New Jersey operational employees voted to decertify their long standing union affiliation; a move unprecedented in the alarm industry.

Richard Kleinman stated “I’m on an NFPA 72 committee and we have three other people in the company on similar committees. We are actively involved in the code making process so that we can make sure that our services are in compliance with current codes and standards.  These standards are in place so when a system is installed it will work properly when needed and not send a (false) alarm when it’s not. Whenever jurisdictions have enforced the codes and standards, like in Boston years ago, false alarms drop dramatically. We want our systems to go in, work when they’re supposed to work and not activate when they’re not supposed to.  For a company as old as we are, we are technologically in a very current place.  We’ve managed to morph from direct wire systems to multiplex to digital alarm communicated transmitters and now to GSM and IP-based transmissions and have a network set up that’s really state of the art. We’re always investing in the company so we’re not resting on our laurels and are always moving forward.”

Robert Kleinman believes “…our commitment to providing the best possible service and operational infrastructure, coupled with our unique customer mix and reputation of protecting our customer base has enabled AFA to enjoy an attrition rate far below the industry norm.”

Over these 140 years, AFA’s growth has been mostly organic. However, Richard Kleinman shared that they have looked at a lot of acquisitions and have consummated some deals in recent years.  The priority for AFA in making any acquisition is being able to fold the business in seamlessly. “Where you have a very good synergistic buy, that carries a premium.” Kleinman said. “You can’t say a business is worth X amount of dollars based solely on revenues. In other cases if you want to use it as a platform, you have to have the model to build on top of that.”

Kleinman concluded that while the company is publically-traded, and the Kleinman’s were not involved with it for the first 100 years of its history, they strive to run AFA as a family company. “We have a lot of great people here [that have been with us for many years], but it’s especially nice to have people in the family interested and driving and wanting to expand on the company my father first got involved with. We’re able to impart some of the tutelage he gave us on the next generation and hopefully they can have the same growth and energy that we have had.”

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