Why Companies Shouldn't Hassle Over Returns, According to Selim Bassoul

In the following video interview, Motley Fool CEO Tom Gardner speaks with Middleby CEO Selim Bassoul. Since becoming CEO in 2000, Bassoul has led a remarkable transformation at Middleby, the cooking equipment maker, turning the stock into a nearly 50-bagger over that time. In the video, Bassoul discusses the importance of Middleby's warranty to his customers and to his company's innovation. 

Tom Gardner: So let's talk about the no-quibble warranty. What is itm and what does it mean for your customers?

Selim Bassoul: Well, it's most probably the biggest game-changer for us. I wish more businesses adopted that. I have adopted this no-quibble warranty from Costco, and I know, I understand. I saw the video of Jim Sinegal sitting here. Jim Sinegal affected and Costco affected me personally more than any other business executive. I had the chance to visit Costco. In fact, everything I wear here, except the belt and the shoes, are Costco -- the shirt, the pants, the socks. Underneath those, the pants and the shirt, are all Costco products.

I like the way they run their businesses. They are frugal. They take care of their customers, and they stand behind a phenomenal -- they have the best warranty in the industry, in retail, bar none. You can return any product. You can even return flowers. I have seen people return flowers because they didn't last two weeks and they wanted them to last more than two weeks. So I adopted that, and I say I need to take our quality to that level.

We started in 1997 with the no-quibble warranty, where we allow customers for 90 days to take a product, and if they don't like it, they return it. Two years ago, we extended that to a year. Remember, we are selling $100,000 kitchens. By the time we take it back, it's all pretty damaged and banged up and scratched, so we can't resell it. But what happened is it gave us three things. That no-quibble warranty, which has not been emulated by any of our competitors. We are the only one worldwide in this industry to create a no-quibble warranty that's in writing. It's clear. It's simple.

It gives us three things. One, it allows our customers to experiment with new technology without fear. So we can roll out a lot faster -- new products a lot faster than anything else. For example, we're rolling out with a major chain a waterless steamer. Think of it. A steamer without water. We'll talk about it in a few minutes. Well, they adopted it because they have a guarantee from us.

Number two, it allows us to make sure that our quality is perfect, because if it's a division that gets a lot of returns, it means that there's something wrong. I give you an example. Many years ago, when we acquired Blodgett, in 2001, we instituted a no-quibble warranty, so Blodgett ended up selling to a new chain, and it's a convection oven similar to the one sitting behind me that has glass. And the glass gets hot, and every time that chain was rolling in the food into that oven, they used a stainless steel cart, and sometimes the cart was pushed against the glass door, and it broke the glass.

And the Blodgett people at the time said, "Well, it's not our fault. The customer is using a stainless steel cart with sharp edges." So we will get -- there's a no-quibble warranty, we'll get all those ovens back. And the management of Blodgett said, "But Selim, this is abuse! This is neglect! This is not how the oven works! It's not our fault." I said, "Well, let's go and create a better mousetrap. Let's get a glass oven that does not break." And today we have a glass door that doesn't break.

Gardner: If a company that is selling $100,000 kitchens can give a 100%, one-year refund, think about what would happen if every company did that. In fact, what would happen? What would happen is people would buy with a little bit more reckless abandon knowing that they could experiment and try things out and return them if they didn't work. It would also lower the defect rate, as you said, so people's quality standard would go up. It would be completely transformative and revolutionary if literally everything that you could buy was 100% warrantied.

Bassoul: Tom, you are totally right. It will change the United States. It will change the way our quality gets better. I think we'll probably beat the Japanese and the Germans on our quality if we adopted that.

Number two, I think it gives a significant warranty and guarantee for people to experiment, and I think that sometimes we are not willing to venture because we say, "Well, what happens if it doesn't work?" Now in my experience, I love the Costco experience because they allow the return, even better than Target or Wal-Mart.

And I love something else: I buy all my cars from a dealership in Chicago called Motor Works. Fascinating. Motor Works taught me another example. I ended up buying from them many, many years ago an E-Class Mercedes, which is diesel. I wanted to save money, and diesel was running 35 miles per gallon, and they were giving a discount on diesel because they couldn't sell them. So the owner of that dealership said to me, "Selim, don't worry about it. Try it. You'll be happy with it, and if you don't like it for a month, return it." So I bought that car in 2004, which I am still driving now. And my father was visiting from Beirut, Lebanon. So my father stopped and filled up, and instead of putting diesel he put in regular gasoline. So within half a mile, that car stopped. And what's fascinating is, I called the dealership. I said, "My father made a mistake." They took the car back and said, "Don't worry about it. It's our problem. The manufacturer should have made sure that you could not put a fuel nozzle that's regular versus diesel."

So I learned a lot from those two experiences, and I said I'm going to adopt the same. Today, every car -- all my employees, almost, buy their car from Motor Works because of that experience. They connected with me.