Smile Factories

Smile Factories

COMPANY by Dave Szymanski | Tampa Bay Editor

Coast Dental Services began in Tampa and is now throughout Florida and Georgia with its sights set nationally.

What business has been growing at 10 to 15 units a year in Florida for several years, began in the Tampa Bay area, and still finds fertile expansion sites in the Bay area?

The answer: dental clinics developed by Tampa-based Coast Dental Services Inc.

Privately held Coast Dental has found a niche industry with relatively little market penetration. And it has pounced on it, reinvesting profits, adding technology, rebranding itself and building a team of blue-chip executives with experience at high-growth and Fortune 500 firms.

Last week, Coast opened a new clinic in Tampa's Westchase area, the company's 118th location.

But Coast has gone beyond Tampa, and even Florida. Coast is now the largest dental care chain in the Southeast. And it has its sights set higher.

"Longer range, we want to go beyond the Southeast and increasingly have a greater presence nationally," says CEO Tom Marler, 46.

Coast ranks in the top 10 dental clinic chains in the United States. About six companies are larger. But they don't compete directly with Coast geographically.

Short-term, Coast will continue to expand its footprint with 10 to 15 centers annually.

Dr. Adam Diasti, DDS, and Dr. Derek T. Diasti, DVM, started Coast in 1992 with a single clinic in Holiday, Fla. called Sunshine Health Services.

Initially, businessman and veterinarian, Derek Diasti, chairman of the board, took it from there.

Derek Diasti, an experienced entrepreneur, launched a number of businesses including Coast. He is chairman of the board of both Intelident Solutions of Tampa and its subsidiary, Coast Dental. By 1996, it had 29 locations.

In 1997, Coast completed a successful initial public offering and secondary offering during the same year, raising $57 million. It grew to 58 dental practices by year end.

By 1998, the company grew to 108 locations. Ernst & Young named Derek Diasti Entrepreneur of the Year in 1998 for his work in building Coast Dental.

The company opened its first 25 new locations in the Tampa Bay area, then went to Sarasota. Now its footprint covers all markets in Florida. In 1998, Business Week named Coast among the fastest-growing 100 companies in America.

Executive suite

Marler, an honors graduate of Harvard and Dartmouth universities, came aboard in 2002.

As a senior executive with Washington- and New York-based Lazard Technology Partners, an early-stage venture capital firm that now manages more than $400 million, Marler was involved in the creation and management of information technology and technology-enabled businesses, and lent his expertise to the boards of several companies as they grew into profitable enterprises.

A San Francisco native, after 10 years in key leadership positions with Pacific Bell, he joined the North Florida region of PrimeCo PCS and helped launch the largest wireless network in the history of the industry. PrimeCo is now a part of Verizon Wireless, one of the world's leading providers of wireline and wireless communications.

Other blue chip executives joined the company, including Lauren Key, who was named vice president of marketing in 2005, having joined the company in 2003 as director of marketing.

During her tenure at Coast, Key spearheaded the introduction of several new consumer products, designed a complete change in brand identity and re-engineered the company's core patient-loyalty programs, resulting in a 50% increase in program revenues. Coast patients who refer family or friends to the practice receive $25 off their next visit. And family and friends will also receive $25 off their first visit.

Key developed successful market-growth initiatives, branding and positioning strategies and business development programs for both Fortune 500 companies and start-up ventures for more than 18 years. She played a pivotal role in the growth of Thermoscan Inc., from a start-up venture to more than $150 million in revenue in five years. Thermoscan is now a part of the international conglomerate, Gillette, Inc., a Proctor & Gamble company.

After joining Coast, Marler assumed daily operations and led a revised growth strategy that included taking it from a public company to a private one in 2005 to save costs.

Coast was formerly traded under the symbol CDEN. It used to spend $1.2 million on public reporting requirements with the Securities and Exchange Commission. After going private, it reinvested the money into technology and expansion.

Marler's objective: Make dental care accessible to a broad base of people.

That meant good and convenient locations. Coast picks major shopping areas convenient to where people shop for groceries at Publix, Kroger and other retailers.

It also sought to establish reasonable prices. Smile Plus is its discount dental program designed for patients who don't have insurance and saves an average of 30% to 60% on most preventative, restorative and cosmetic dentistry services. For an annual fee, patients get dental care without the hassles of traditional insurance.

Coast Dental Advantage, its flexible extended-payment plan, offers no-interest and low-interest payment options with no annual fee and payments starting as low as $25 a month for patients who qualify.

It has also introduced new technology to offer more efficient, more rapid service than other dentist offices.

That included a 2006 purchase of Kodak's digital dental x-ray equipment, which produces better, faster images.

The other cog in the growth plan involved attracting and retaining good dentists. The idea was that Coast dentists joined the company so they could focus on dentistry, not business.

"We give them autonomy, without worries about being a small business person, with payroll, vendors and insurance," Marler says.

This is designed to improve the patient's experience as well. Dentists who can focus on care have more time with patients. But typically, dentists who control their own clinics make more money.

So Coast built that into its growth plan, too. According to the American Dental Association, the average salary for an American dentist is about $125,000 a year. Coast dentists earn $225,000.

"Our dentists find it very appealing," Marler says. "They get high-quality time with patients and see a moderate volume of patients. It's a very positive experience."

Coast operates in Florida and Georgia. That's by design. Both have a low per-capita penetration of dentists, among the bottom five markets in the country. Despite being a high-growth state, there are fewer dentists in Florida.

State licensing requirements make Florida a relatively difficult state for dentists to transfer into.

"Florida has a unique licensing requirement and for a dentist practicing 10 to 15 years, if you're away from academics, it could be challenging," Marler says.

The in-state home-grown pipeline is also limited, with only the University of Florida and Nova Southeastern graduating new dentists in Florida.

Still, since Coast picks robust markets, fertile for new clinics, and dentists seek the company out. There is still room for growth.

"We started expanding in Tampa Bay 15 years ago and our latest location is in Tampa Bay," he says.

But the growth path is not vacant. There are competitors with multiple locations. Those include Christie Dental; Heartland Dental Care of Effingham, Ill.; Georgia's Jerry E. Nutt DDS, with 17 locations in Georgia and Florida; and the Manston Dental Group.

Bright Now! Dental, of Santa Ana, Calif., is the industry's biggest company with almost 300 offices in 18 states.

Like Coast Dental, Bright Now! supports independent dentists in the administrative, financial, marketing and information services aspects of their practices, allowing the dentists to devote the majority of their time to caring for patients and maintaining their dental knowledge and skills.

Dabbling in real estate

Real estate and dental care obviously go together if the dentist is looking for a good location for a clinic. But with Tampa-based Coast Dental Services, it goes beyond that.

Coast has bought a 100-year-old former cigar-making building on Howard Avenue in historic West Tampa and is remodeling it as the site of its new corporate headquarters.

But it's biggest real estate deal - covering 10 acres, tabbed at $100 million and one of the biggest urban redevelopment projects in the Tampa Bay area - has nothing to do with dental care.

When it went from a public to a private firm, Coast Dental created a new Tampa parent company, Intelident Solutions.

Intelident has worked out a deal to completely redevelop the Fort Homer Hesterly Amory property on Howard Avenue in West Tampa - an 80,000-square-foot, 1940s-era art deco building and surrounding urban property - and relocate the Florida National Guard to Pinellas Park. The South Tampa project is called Heritage Square.

The multi-million-dollar project will include a hotel, art studios, stores and a park, preserving the white, hangar-like armory building, where President Kennedy and Dr. Martin Luther King Jr. spoke and Elvis, James Brown, Pink Floyd and Buddy Holly performed.

The project includes the following:

• The Armory building would be rehabbed to house specialty retailers and restaurants on the ground floor; upstairs would include offices intended for creative industries, and affordable artist studios. The building would be flanked on two sides by an open-air, year-round farmer's market.

• A four-story 300-room hotel that would aim to be Tampa's only 5-star establishment.

• A luxury spa that includes a state-of-the-art fitness center and holistic health center.

• A public park styled after an English garden with ample shade trees.

• The West Tampa Cultural Arts Center would restore a red brick building on the site and make it a museum/meeting place for local organizations.

• Two parking garages (with room for more than 800 cars) with offices on the top.

"We got involved because Intelident had an opportunity," says Tom Marler, CEO of Coast Dental and Intellident. "West Tampa is so rich in history."

When the company acquired the cigar factory on Howard, the city was taking proposals from companies on redeveloping the Armory property.

Intellident was working only four blocks away. It assembled a team of architects and other professionals, developed a proposal and won the right to build it, beating out five other groups with the most ambitious of the proposals.

Although Heritage Square is sprawling, compared to a Coast Dental clinic, the company was experienced in finding real estate, designing buildings and getting them done.

"Were not developers," Marler says. "But we thought we could influence the design. Even though we didn't always know exactly what do, we've assembled a good project team."

Heritage Square LLC of Tampa includes Coast Dental founder Derek Diasti, architect Stephanie Gaines, planner Michael English and Clearwater builder Alan Bomstein.

Intellident has a purchase agreement on the property, which is owned by the Florida National Guard. Intellident is buying land and building the Guard a facility in Pinellas Park.

The Pinellas Park facility needs to be done before Heritage Square. Both projects are expected to take four years, total.

Smile to success

A 2006 study by Beall Research & Training of Chicago shows that an attractive smile makes people appear more intelligent, interesting, successful and wealthy to others.

Pictures of eight people were shown to a statistically valid cross-section of the population. Respondents were asked to quickly judge the eight men and women as to how attractive, intelligent, happy, successful in their career, friendly, interesting, kind, wealthy, popular with the opposite sex, and sensitive to other people they appeared.

Half the photos pictured individuals before they had cosmetic dentistry procedures; the other half pictured them afterward. The results indicated that an attractive smile has broad benefits.

Though the change was most dramatic for the labels attractive, popular with the opposite sex, wealthy and successful in their career, the changes were statistically significant in all areas.

The eight subjects viewed by respondents were evenly divided by gender. Two had mild improvements through cosmetic dentistry, two had moderate improvements, and four had major improvements to their smiles, to give a wide range for respondents to view. None, however, had visibly rotten or missing teeth or catastrophically bad dental health in the before shots.

Respondents were not told that they were looking at dentistry, but were asked to make snap judgments rating each person for the 10 characteristics, on a scale of one to 10, with "one" being "not at all," and "ten" being "extremely."

The "after" ratings ranged from 5.9 to 6.8 and increased in every category from "before" to "after," from 0.4 to 1.3 points.

REVIEW SUMMARY

Company: Coast Dental Services Inc.

Industry: Dental clinics

Key: Penetrate more markets by allowing dentists to focus on the practice and not deal with running a business.