Ohio Art has reinvented itself several times in the 112 years of the company’s existence.

Henry Winzeler, who founded the Bryan, Ohio, company in 1908, started out making metal picture frames and buying photographs to put in them. The framed images were sold in Woolworth’s, five-and-dime stores and the Sears catalog.

Winzeler sought other ways to use the lithography machines he had bought to decorate the metal and, around 1918-19, began making toy tea sets. “It was just a huge success,” says Elena West, Ohio Art’s CEO. By the mid-1930s, the company had shifted away from picture frames and was primarily a toymaker, although it continued producing a few items outside the category. In 1928, it negotiated a license with Roy and Walt Disney to make toys featuring Mickey Mouse, Donald Duck and other characters, a project that continued for decades.

During World War II, Ohio Art, like many American companies, focused on aiding the war effort. The company stopped making toys in 1942 to produce gunsights, bomb whistles and other parts needed by the military.

After 1945, the company returned to toy production. By this time, parents were shying away from metal toys, fearing danger to their children, and the company began incorporating plastic into its lines. “Once again, Ohio Art decided that they needed to pivot,” West says. “That left a big open opportunity for the business to look at other things they could potentially do with their machinery.”

To complement its toys, the company began making metal products such as TV trays and “butt buckets” (buckets that were filled with sand and used as outdoor ash trays).

Meanwhile, on the toy side, the company introduced the Etch-A-Sketch, a mechanical drawing toy, in 1950. Ohio Art shifted to making plastic tea sets. It also made globes and Chinese checker sets.

In 1977, the Winzeler family sold their stake in Ohio Art to the Killgallon family. W.C. Killgallon had started with the company in the 1950s as a salesperson and rose to president. The company today is 89% owned by the Killgallon family.

By the late 1980s, Walmart had become a retail powerhouse and was demanding low prices from its suppliers. To accommodate the large customer, Ohio Art moved manufacturing to Asia. “That left an open opportunity for the business here in Bryan to diversify even further,” West says. “And, again, that was where the metal lithography came into play.”

Second-generation owner Bill Killgallon — West’s uncle — asked his brother, Larry, to join the company and start a diversified products business. The new division “reinvented the company to focus on what we could do outside of toys to continue to be prosperous and keep everyone employed here in Bryan,” West says.

The diversified product line included metal trays and other products bearing logos licensed from Budweiser, Coca-Cola and other companies; Kodak and Fuji film cartridges; popcorn tins; and jar lids and cans for food companies.

“We still do a lot of food product, and that’s one of the reasons we’re considered an essential business [during the COVID-19 pandemic], because we support the food industry,” West says.

West joined Ohio Art in 2013 and became its CEO, working alongside her cousin Martin L. Killgallon III, the president. By that time, the challenges of the toy business had multiplied. Big-box retailers dictated pricing and packaging.

“Small, mom-and-pop businesses were going out of business all the time, the specialty market was also becoming narrower and the opportunity was just going away,” West says.

When West and Martin Killgallon began working together, “one of the first decisions we made as a team was to focus the future of the business on the lithography side versus the toy side,” she says. That included selling the Etch-A-Sketch brand to a Canadian toy company, Spin Master.

West calls the move “probably the best decision we ever made. Because since that time, so much has happened in the toy business that would have really crippled us even further,” including the bankruptcy of Toys R Us, tariff issues and the coronavirus.

“It was a really big decision, because the toy business was our heritage and our livelihood, and that was really the exciting part of the business. We traveled all the time for toys, and it was really a major part of our identity. And the lithography business was less exciting. But it was solid.”

When West was a college student, 300 to 400 people worked in Ohio Art’s Bryan factory. Today, the company has 85 employees.

Because Ohio Art uses Chinese suppliers to make components for its inks and varnishes, management noticed the coronavirus spreading in China before it came to the United States. That sparked the company’s quick implementation of precautionary measures.

“We were already looking at our supply chain early on, making sure that we had plenty of material to get us through to the next large order that we anticipated for the year,” West says.

“As soon as the first recommendations came out from the governor’s office here in Ohio, we implemented them immediately in our factory.”

West is in the office daily and personally manages the company’s COVID-19 response.

“Having myself out there every day, being in front of [employees], showing them that I’m in it with them — as well as Martin and as well as our management team — I think it has made a big difference. I hope it’s made a big difference.” 

Jeff and Elyssa Kotzen’s hot yoga class on Friday, March 13 was not a zen experience.

Jeff, the fourth-generation vice president of J.W. Lopes, a wholesale produce and dairy distributor in Chelsea, Mass., was unable to relax. Although Massachusetts Gov. Charlie Baker would not announce mandatory restaurant closures until the following Monday, orders from restaurants were already drying up as COVID-19 began to spread through the country.

Elyssa turned to her worried husband at the beginning of the 60-minute class and said, “We have got to do home delivery. We can do this. We’ll go home and we’ll figure it out once we’re done here.”

Once they got home, the couple sprang into action. “We both got on our computers, and I started drafting an email to our closest friends and family with our rough-around-the-edges idea of what this would be,” Elyssa says.

Moving into direct-to-household food delivery would meet an important need, Elyssa realized. The company’s new customers “don’t have to rely on a grocery store visit or an Instacart delivery that gets dropped. I’ve been reading all these stories about people refreshing [their computer screens] in the middle of the night to get slots for meal and food deliveries.”

Adapting the company’s wholesale processes and ordering platforms to accommodate retail orders was no small task. “It was definitely trying to fit a square peg into a round hole,” Elyssa says.

“The system offers no bells or whistles. It is all-capital-letter gray text; no pictures. There’s no additional information about ingredients or quantities of certain things. It was really bare-bones.”

The Kotzens named their home-delivery venture New England Country Mart and used social media to get the word out. “I’ll be the first to admit that I’m not a social media guru, by any means, but I quickly became one. My personal background is in public health,” says Elyssa, who works for a foundation and previously worked in the hospital industry.

During the new venture’s first four weeks, Elyssa updated the J.W. Lopes website, created a New England Country Mart site and managed social media for both businesses. “I was trying to get acclimated to all of it,” she says.

The efforts were wildly successful. “We started with maybe 40 people [customers], and that became 80 people, and it became 200 people, and we just kind of grew,” ­Elyssa says. “We realized the power of word of mouth and email forwarding and photos on social media.”

Jeff and his father, Peter, are partners in J.W. Lopes; Jeff’s younger sister, Alison, works there as well. To help the Country Mart get off the ground, Jeff’s mother, brother-in-law and older sister pitched in.

“It was all hands on deck where necessary to get the initial bulk of the work uploaded in the computers and get things going, which was great,” Jeff says. Everyone really stepped up.”

The new business started out offering produce, J.W. Lopes’ main product line. Jeff soon added fish from a friend’s fish distribution company.

“We had such positive feedback on the fish as an addition to our produce that we grew one week at a time by reaching out to local companies: bakeries, butchers, dairy companies,” Jeff says. The partnerships enabled the Kotzens to help other local food businesses that were struggling because of the pandemic.

They formed other partnerships, as well. Jeff contacted a friend who works at a website development company. The friend built an upgraded New England Country Mart website within two weeks.

“It was a huge opportunity for an optimized experience for the customer, and a way easier way to manage everything on the back end, operationally, for Jeff and his warehouse crew,” Elyssa says.

A public relations firm reached out to the Kotzens and offered to help with publicity. “They also have clients in the food industry, and their business essentially dried up with the COVID-19 pandemic as well, so our story really resonated with them,” Elyssa says.

“They’ve helped us develop a social media schedule and create some consistency around our messaging. It’s just nice to have a sounding board, because this is all very new to me.”

The Kotzen family has previous experience with business reinvention. Jeff’s great-grandfather started selling produce at Boston’s Faneuil Hall marketplace. The business originally sold produce to retail grocers.

“Over several generations, the retailers became bigger and more efficient, and they started buying directly from the farms, rather than from a distributor like my family’s business,” Jeff says. “The business had to evolve; they couldn’t rely on Stop and Shop to buy 5,000 cucumbers anymore. So they had to look for other avenues to sell their products.

“My dad was smart enough to see that there was a downward trajectory in that business. He sold the original business with his two brothers and started a distribution business with me in 2006.”

Jeff says his father “really had the vision that [the original] type of business was a dying breed, and being a direct-to-food­service distributor was more of a vibrant business than relying on retail chain markets, which were only really using the services in a fill-in capacity.”

At J.W. Lopes, Jeff says, “We’ve always been flexible. We sell to the state prison system as well as really high-end, white-tablecloth restaurants. And I think that’s a testament to how flexible we are to be able to pivot to any type of business.”

Pivoting to direct-to-consumer delivery involved logistical hurdles. J.W. Lopes’ wholesale business has about 800 customers. The Country Mart venture added upward of 1,200 new customers, and counting.

To manage the booming demand, the direct-to-consumer business imposed a waiting list, adding new customers weekly and monthly as the Kotzens learned how to manage the growth and ensure every customer would receive high-quality service and products.

The success of the venture enabled the Kotzens to invite everyone they had laid off at the start of the pandemic to return to work.

“We’ve hired, too, so the company’s actually larger now than it was,” Jeff says.

Elyssa’s public health background is helping the company ensure a safe working environment. “All of our drivers, all of our packers, everyone, whether they’re in the back office or frontline, is taking all precautions,” she says.

The new venture has public health benefits. “We’re trying to reach the elderly and the immunocompromised” to help them obtain groceries in a safe way, Elyssa says. “We’re really committed to and sensitive to that demographic in this situation.”

What started as a stopgap measure for J.W. Lopes is now being considered a permanent division of the business.

“I don’t think we had initially thought that this would be a long-term business idea,” Jeff says. “But as the Country Mart grew, and our offerings continued to grow, and the feedback we continue to get from customers is so positive, we definitely have our eyes set on larger things as we move forward.” 

When COVID-19 began to spread through the United States, the Sessler family saw an opportunity for one of their businesses.

Sessler Environmental Services (SES) of Rochester, N.Y., provides environmental remediation and demolition services for private- and public-sector clients. The company, which offers mold and asbestos remediation services, now also provides coronavirus remediation, including disinfecting and surface protection.

“It wasn’t even a hard decision to say, ‘Hey, there’s going to be a market and a need for this,’ ” says Brian Sessler, managing family member at SES.

The new line of business caused some logistical problems. Schools were closing because of the pandemic, and SES’s school district customers began asking if asbestos remediation projects they had scheduled for the summer could be started earlier. That meant the company’s crews would be busier than ever.

“All of our jobs have been deemed essential, so our normal work hasn’t necessarily slowed down, and we’re now offering this other service, which is ramping up. We’re doing more and more,” Sessler says.

To adhere to social-distancing protocols and keep workers safe, the number of people on each crew was reduced, requiring plans to be altered. At the same time, the office was in the middle of a renovation. “It was a stressful couple of weeks,” Sessler says. Since the pandemic began, the company has hired about 15 additional people.

Managers were consulted before the company took the leap into coronavirus remediation. “It was vitally important to bring them into the mix,” Sessler says. “We didn’t want to stress operations just because we wanted to do the COVID cleanup.”

Crews have been issued full face masks rather than cheaper masks that cover only the nose and mouth. “We had to implement protocols,” Sessler says. “We’re documenting all of our employees’ temperatures before and after every shift.”

The family enterprise was started by Sessler’s grandparents. SES, owned by the third generation, was formed to complement Sessler Wrecking, a demolition company that is owned by second-generation members. Other family companies include a development company, a marina and campgrounds.

“As long as you have the right people within your company, from your top managers all the way down, it’s very easy for a company to shift direction and morph into something that’s needed at the time,” Sessler says. 

Pivoting to make a new product quickly has always been a hallmark of Lacerta Group Inc., a family-owned plastic packaging manufacturer based in Mansfield, Mass.

But never has the company shifted gears as quickly as it did last March. Co-founder and principal Mostafa Lotfi, 56, received a mass email from a doctor friend requesting help in securing face shields to protect against infection from COVID-19 patients he was treating.

Lacerta Group focuses mostly on custom plastic packaging for a variety of products, such as grocery items and consumer electronics. Mostafa, 56, was sure his company could retool its equipment to produce the kinds of face shields needed by frontline workers — from doctors to supermarket employees — across the country.

The email came in on a Friday. Mostafa designed a prototype shield over the weekend. By Monday the shield was in production. After a few tiny tweaks Lacerta started sending it to hospitals. Then the company started making more.

“We originally thought by the end of March we’d produce 20,000 shields,” says principal and co-founder Ali Lotfi, 61, Mostafa’s cousin. “By the next morning, that plan went to half a million. Then we scaled up our production capacity.”

In mid-May Lacerta was churning out 350,000 to 400,000 face shields per day, via three machines and three shifts in Massachusetts and one machine and one shift in its California facility. The scale of the endeavor has far surpassed the family’s original plans. In May, Lacerta sent its first shipment (three truckfuls) to the Federal Emergency Management Agency.

The firm is donating 1,000 face shields to any hospital or other healthcare institution that reaches out with a request. As of early May, the company had produced more than 6 million face shields and donated about 250,000 of them. The donations have slowed down a bit as the company receives fewer requests, but it’s still donating cases every day.

Lacerta is selling the shields to grocery stores, co-packers, food processors and other essential businesses. The masks are made of a single sheet of anti-fog plastic (the same type used to make soda bottles) that adjusts to various head sizes.

“We designed the shields based on how they could be produced in large volume and be cost-effective based on the equipment and materials that we had in house,” Mostafa says.

Once the principals decided to start producing masks, their employees quickly rallied around the idea.

“We are generating revenue, which has been positive from our employees’ point of view, but they’re also happy to be doing something that’s necessary and helping people,” Ali says. “Our employees have been sending us emails and letting us know that they’re so happy to work in an organization like this. That’s been very rewarding to see.”

Face shield production now represents about 25% of Lacerta’s total production, while the firm has seen about a 30% drop in other orders since the crisis hit. To accommodate the mix shift, Lacerta committed one extrusion line and four production machines to the shields.

Lacerta has implemented new procedures aimed at preventing germ spread and keeping the factory running safety. The company began round-the-clock sanitation in February, stepped up safety education efforts, provided additional sanitizer and required all workers to wear masks and shields.

Flexibility pays off
This isn’t the first time Lacerta has changed its business model, though previous pivots typically reflected changing economics rather than an urgent community need.

The company — founded by Mostafa, Ali and Ali’s brother Mory Lotfi, 56 — began in 1993 as a recycler of data storage products like computer cartridges and videocassette tapes. That led to work producing packaging for Polaroid. Over time, Lacerta focused more on the packaging than the recycling.

“Over the last 27 years, we have run through several industries that have dried out; we’ve had to change our technology,” Ali says. “Polaroid was 80% of our sales at one point and then they went to nothing. We have been able to adjust very quickly to meet the needs of our customers and recognize what those needs are going to be.”

The three founders remain co-owners of the firm. Ali serves as president and oversees sales, Mory handles finances and Mostafa focuses primarily on production. Ali’s wife, Denise Lotfi, 59, serves as Lacerta Group’s accounting manager and has worked at the company since its launch.

“Innovation has been part of our success, and being flexible and able to change on the fly,” Ali says. “That has kept us competitive and able to compete with bigger corporations across the United States and Canada.”

The firm also benefits from having a team of eight designers and a mold shop in-house, which speeds up the production process drastically.

“We can turn around concepts and get production molds made in a fraction of time compared to the industry norm,” says Jazmin Lotfi, 28, Ali’s daughter, who works in sales and marketing. “We also don’t work on any commodity-style packages that you could get from anyone here or overseas. We try to have our packages distinguish our customers on the shelves and add value.”

Lacerta’s status as a privately owned family business allows it to be more nimble when opportunities arise. There are fewer layers of bureaucracy at Lacerta, where even major decisions often follow relatively casual conversations.

“We mobilize quickly and are willing to adapt,” Jazmin says. “That can be hard for some people, but it’s always been a part of our culture.”

The ability to move quickly reflects an inherent trust among family members. Ali, Mostafa and Mory lived in Iran as children before moving to the United States as teenagers. Ali came first, in 1978, to attend engineering school at Northeastern University. Mostafa and Mory followed shortly after and finished their high school education in Massachusetts before going on to study engineering at Northeastern. Ali and Mory ultimately earned master’s degrees in engineering as well.

“We have grown up together from childhood, so we read each other very well,” Mostafa says. “The majority of our decisions, we just have a conversation and then decide what we need to do and do it. We can make a decision in a matter of minutes, if we feel strongly that it’s what is required. We will implement it right away.”

That type of decisiveness is a common trait among successful family businesses, says Edmund (Ted) Clark, executive director of the Northeastern University Center for Family Business. Once they’ve been around for a few decades, family businesses have a competitive advantage due to the combination of their experience in various business cycles and their ability to make decisions while thinking long-term rather than worrying about shareholders or outside directors, he adds.

“Family businesses can take this long-term view and see the value of shifting gears and giving back to the community,” Clark says. “That reflects maturity that an adolescent startup doesn’t have, and the luxury that a public corporation doesn’t have to not worry about always chasing short-term investments.”

A growing company
Like most American businesses, Lacerta struggled in the last economic downturn. In January 2008, the firm had to reduce pay for all employees by 20%. That’s also when Lacerta switched markets from consumer and industrial packaging to focus more on food and medical devices.

The company invested in better equipment and ended up growing 8% that year. Today, Lacerta has three buildings, housing 27 lines, in Massachusetts; and a 100,000-square-foot production and warehousing facility in California with another seven lines. Nearly 350 employees work across the U.S. operations. There’s also a sister factory run by a family member in Mexico. The company says its revenues have tripled since 2014.

Aside from face masks, the firm today focuses mostly on clamshell packaging, containers and tamper-evident packaging for food, cosmetics, electronics and industrial uses.

The Lotfi children have always had a close relationship with the company, often working in the factory as teenagers. Jazmin says some of her fondest memories of the business are of working on the production line and helping out on the floor.

“Everyone was always so nice, and we felt so helpful,” she says. “We all called it ‘Camp Lacerta’ growing up.”

Jazmin was the first of the Lotfi children to join the firm full-time, coming on board in 2013 in a sales position. Then Mostafa’s two sons, Kian, 27, and Arman, 26, joined on the production side of the business. Last year, Ali’s middle daughter, Azita, 24, began working in a marketing and sustainability role. (Ali’s youngest daughter is still in college, and Mory’s two children are also still in school.)

“It was just something that I always knew I wanted to do,” Kian says of working for Lacerta. “I grew up in the industry, coming here since high school. I made the decision right out of college to come here and keep applying the knowledge that I’d picked up over the years here.”

Jazmin says she’s also gotten a business education from watching the company grow — from a dozen machines when she worked there in high school to more than 30 today.

“If I were a senior in high school and you told me that I was going to go work for my dad, I would have said ‘no way,’ ” she says. “But now I think it has made our relationship better. Learning with him as a mentor, seeing how he handles things, has changed the way I think about business in general.”

Delivering what’s needed
The Lotfi family has yet to discuss long-term succession plans. Instead, they’ve been focused on continued growth.

“We have been growing so fast, double digits every year over the past 10 or more years,” Mostafa says. “We haven’t really planned what we’re going to be doing what in five or 10 years from now. We’re just trying to make sure we can deliver what is needed now.”

For now, that means they’ll continue producing shields for as long as needed.

“The news changes daily, but there could also be a second wave [of the pandemic],” Jazmin says. “I think we’ll be producing these at some capacity — maybe not 300,000 a day, but it will be something that people are seeking out for a while."                                                               

Beth Braverman last wrote about financial strategies to deploy in the current economic downturn.

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.    

For decades after COVID-19 finally fizzles out, scholars in many disciplines will be analyzing the lessons learned from this crisis. We don’t need the advantage of hindsight, however, to recognize one key point: The businesses that so far have been best able to withstand the economic and public health emergencies are those that could implement change quickly.

Companies threw their strategic plans out the window as scientists urged people to stay home and the economy tanked. In many cases, survival has required dramatic change: to staffing levels, to factory floor design, to deployment of capital, to organizational priorities and even to entire business models. Nationwide unrest following the killing of George Floyd by a Minneapolis police officer on May 25 added to the challenges America must confront as a nation.

Which businesses have been best equipped to make major shifts on the fly? Privately owned companies with low levels of bureaucracy and a long-term focus tend to be the most adaptable. Most family businesses fit that description. But in this instance, continuing operations while maintaining goodwill has required an additional factor: strong relationships.

In this issue, we highlight family firms that have persisted during the pandemic while prioritizing team members’ health as well as preservation of the family’s investment. Some of these enterprising families have created a new business ventures they may pursue even when the crisis has passed. Many are drawing on the “credit line” of mutual respect they established with their employees through years of fair treatment and transparency.

Also in this edition, I report on how family values and family dynamics factored in as multigenerational business families plotted their response to the spreading coronavirus and faltering economy. With so much at stake, complexities escalated quickly.

What considerations should receive top priority? Which practical steps should we take? Who should be involved in the decision making? Clarity hasn’t necessarily come easy. As several family business advisers pointed out to me, many of these questions have not had a single right answer.

It’s far too early to tell what the long-term effects of the crisis will be, in terms of both business sustainability and changes in family interactions. More tough decisions are likely on the horizon, and families will have to work to reach consensus.

On the other hand, advisers have reported that early on in the pandemic, they saw families coming together to share updates on their business and check in with each other. Agreements on donations to help community members affected by COVID-19 were arrived at quickly. Those wins might bolster families as they head further down the bumpy road ahead.

Success going forward will depend on strong relationships with family members, employees, customers and suppliers. Many family business leaders are well acquainted with the fine art of relationship building. Those CEOs are starting off on the right foot.

Copyright 2020 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.    

NextGens who join their family business often make a number of changes to modernize the company, such as upgrading the technology and increasing the company’s presence on social media. It’s only natural for the younger generation to make these kinds of innovations; they are generally the family members who are most up to date in these areas.

Some NextGens go a step further: They start a new, related company that will appeal to a younger crowd or another new market segment. One such entrepreneur is 32-year-old Alyza Bohbot.

In 2015, Alyza took over Alakef Coffee Roasters, in ­Duluth, Minn. In addition to running the company her parents started in 1990, she launched City Girl Coffee Company, which operates under the umbrella of the older, established family business. City Girl sources its coffee from women coffee farmers and donates a portion of its sales to organizations that support them.

The early years
Alyza’s parents, Deborah and Nessim Bohbot, emigrated from Israel to the U.S. in the 1980s. Deborah, who was born in America, is trained as an audiologist; Nessim, a chemist who grew up in Morocco, taught French during the couple’s first few years in the States. They drank specialty coffee, although at the time it was hard to find in the States. Their neighbors seemed happy with mass-market brands, but the couple thought if they educated them about higher-end coffee, they, too, would appreciate it.

Nessim started roasting coffee beans in their kitchen, and the couple launched their own brand in 1990. Deborah continued to work as an audiologist while helping the company get off the ground.

When she was growing up, Alyza was around the company all the time. “I’d help my parents put labels on bags when I was little and go with them to trade shows, customer demos and other events,” she recalls. As a college student, she served as a sales and marketing intern in the company between her sophomore and junior years and reported to the company’s general manager at the time. “I didn’t work there every summer, but I was definitely involved,” she says.

Yet Alyza was more interested in vocal jazz than in entering the business. She planned to get a degree in music at Syracuse University until a diagnosis of nodules on her vocal cords precluded a singing career. Instead, she studied retail management and worked for Samuel Adams beer in Boston for two years. Following that, she studied for a master’s degree in guidance counseling. When she learned her parents were considering selling the business, Alyza decided she didn’t want that to happen. She also thought she was the best person to take over, so after getting her graduate degree, she took the leap.

Over the years, as specialty coffees gained ground, Alakef had lost relevance. “My parents had one of the first coffee roasting companies in the state of Minnesota to be certified as organic by the Minnesota Crop Improvement Association,” Alyza says. “They offered fair trade. They did custom blending and private labeling. They did small batch, roasted to order, all those things. That was all wonderful and differentiated them early on.

“We’d evolved a little as a brand, but because we hadn’t really invested significantly in marketing, branding and advertising, we just weren’t as recognizable as others, and there was no way we could innovate and gain new market share,” Alyza says.

Passing the baton
Alyza actually asked about taking over the company three times, her mother says.

“The first was when she graduated college, and we told her we’d rather she worked outside the company first to get some experience and see if this is what she really wants to do,” Deborah recalls. “The second time, she was getting ready to leave the company she was working for, and she brought it up again. We asked if the family business was her passion, and she wasn’t sure, so we said no. The third time she asked, she was sure.”

Deborah advises other family business owners in a similar situation to make sure their child really wants to take the reins and that the young person is ready.

She recalls that she and her husband would have been nervous about anyone taking over, but they had confidence in their daughter and were excited about the idea. “After all, she had us to guide her; we had her back,” Deborah notes. A big selling point was that Alyza’s marketing background exceeded theirs, along with the fact that she is “bringing the company into another dimension,” Deborah says.

“When we started the business, we grew mostly by word of mouth,” Deborah notes. “It’s a different world today, so her marketing savvy really helped with that.”

Second-generation transformation
When Deborah and Nessim retired in 2015, the three agreed that Alyza would have a six-month trial. When that period ended, the parents and their daughter arranged a 10-year buyout.

Alyza knew that in order to continue Alakef as a viable company and increase revenues, she’d have to make changes. The company would have to be more aggressive, find new differentiators and undergo a rebranding.

First, Alyza rebranded the website and hired someone who understood social media. “When I came into the business, I think Alakef had 700 likes on our Facebook page. Now, we have over 5,000,” she notes.

She also began focusing on City Girl Coffee. The idea for the sister company came to her when she attended a breakfast hosted by the International Women’s Coffee Alliance and learned about countries in which women have no say in coffee businesses. From the first, she invested heavily in the new company, with a team that could “inundate all social media platforms and heavily brand the business,” she says.

To build a following, City Girl hits all the big social media platforms: Facebook, Pinterest, Instagram, Twitter and Snapchat. “We continue to learn and evaluate new ideas, but one thing we knew would be important for revenue, whether it was our online retail or our grocery retail partners, was that we had to create brand awareness through the various social media platforms,” Alyza says. “It helped us create consumer trust for purchase decisions.”

Because it uses the Alakef equipment and has adopted the parent company’s best practices, City Girl enjoys economies of scale. “The differentiation comes in how we source the coffee and where we’re sourcing from,” Alyza says. “With both brands, we are sourcing in the top 5% of specialty grades from around the world and using responsible and sustainable sourcing methods and procedures. With City Girl, we have the added piece of sourcing from women-owned or -managed farms and cooperatives.”

Alyza has expanded the marketing team for City Girl. The production and headquarters staff for both coffee companies are in Duluth. A second office in northeast Minneapolis is home to the marketing and sales team. Alyza lives with her boyfriend and two dogs in Minneapolis.

While City Girl saw a 300% increase in sales in both 2016 and 2017, Alakef has been fairly stagnant because Alyza been putting a lot of her energy into City Girl. Together, the two companies generate annual revenue of around $2 million. The majority of that derives from Alakef, with the growth coming from City Girl. But as Alyza rebrands Alakef, she’s already starting to see a shift.

“There’s a reinvigoration of the brand, and customers are responding to Alakef’s new packaging and logo,” she says.

Alyza says the family is very close, which she attributes partly to her being an only child. Her parents are her main advisers. She has consulted with them about how to engage employees — there are 14 total — and make them feel empowered, for example. “I’m changing some things in terms of employees having some skin in the game, making them accountable for what they produce and how they contribute to the company, and those kinds of things,” she says. “That’s not something my parents did, but I have some different ideas on how to invigorate people and get them involved in an even greater way.”

Reaching out
Alyza leans on her dad, “the master roaster,” for his thoughts on that process. She relies on her mom to help her understand the back end of the business. “She handled the financial piece for years, and that’s not my area of expertise,” Alyza says. “I’ve got a good understanding of business math, and a balance sheet and cash flow, but I will often just have my mom take a peek at things. I’ll ask, ‘Does it look like I’m running things all right? Operationally, are we on track? Do you see any red flags from a financial standpoint that I should be concerned about?’ ”

Instead of a chief financial officer, Alyza relies on Alakef’s general manager of more than 20 years. “He’s an operations guy who’s been my right hand in terms of how we get to the next level, and what that looks like, and foreseeable challenges we may face — from a personnel issue to a capacity issue to an inventory issue,” she says. She has also hired a head of sales who worked for Coca-Cola and another coffee manufacturer.

She has partnered with Minnesota’s basketball teams, the Timberwolves (NBA) and the Lynx (WNBA). She also participates in festivals, including those centered on women, through sponsorships and events.

Alyza has tapped the expertise of the CEO Roundtable in Minneapolis. It’s been a place where she can go to talk about the issues she’s facing and a way to get feedback from people who have been in her position.

While “I feel like I’ve got some good instincts,” she says, “I’ve really only been doing this for a few years, so I’m certainly not so naïve as to think that I’ve got everything figured out and I know all the answers. When someone is willing to share their background, or share experiences that I might learn from, I am all ears.” She’s also joining the Women Presidents’ Organization.

While Alakef has always given back to local organizations, Alyza has changed the philanthropy program. She has named it Alakef Gives, although the program includes City Girl. Each year the company donates a portion of its profits to about five non-profit organizations chosen from a pool of organizations nominated by consumers.

“We’re getting our consumers involved in this local give-back piece that has been so important to us as a company,” Alyza says. “We’re inviting our customers to be a part of that, and to let us know who they really care about and what organizations and individuals within their communities need our support.

“Alakef is for people who want to have a local impact,” Alyza says. “If they want to have more of a global impact, then City Girl is their brand. We want to be seen as a company that is trying to have a greater impact on all levels.”  

Patricia Olsen is a business writer based in New Jersey.

Copyright 2018 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

The Duchossois Group Inc. has come a long way since its founding in 1916 by A.J. Thrall and his brother-in-law as Thrall Car Manufacturing Company, a small freight car component repair shop.

The family has re-engineered the company several times since its founding. "Any time you get a family business that is 100 years old, there is an extraordinarily high probability that they got there because they reinvented themselves—they adapted," says Craig Duchossois, 72, the chairman and CEO.

"We went from Rust Belt manufacturing to knowledge economy companies involved with commercial products," Duchossois says. "Then we turned around six years ago and said, 'We need to reinvent ourselves one more time.' "

Today The Duchossois Group, which is 100% family-owned, consists of two units: an investment company and an operating business. Duchossois Capital Management is the investment arm. The operating company, The Chamberlain Group, is a leading maker of access control systems such as garage door openers and gate access devices. It has more than 5,000 employees and generates more than $1 billion in annual revenue.

Investments in technology helped transform the company. One of The Chamberlain Group's recent offerings, for example, enables a user in London to open and close a garage door in Chicago via an iPhone app.

In order to arrive at its present structure, The Duchossois Group sold some of its divisions. The family also sought—and received—buy-in from members of the third generation, who said they want to carry on the family business.

The company and family have been recognized for their leadership and commitment to diversity. The current focus is on building a leadership structure that will sustain the company through future transitions.

"My primary priority right now is to continue to work with the next generation of family leadership to prepare them for leadership positions in our companies," Craig Duchossois says.

Changes through the years

The company's first reinvention occurred as Craig Duchossois's grandfather, A.J. Thrall, worked to keep the business going through the Depression and World War II. He moved from repairing car components to repairing rail cars themselves, as well as leasing cars.

Craig's father, Richard L. Duchossois, now 95 and the company's chairman emeritus, served in World War II, where he earned a Bronze Star and Purple Heart. When Richard returned from the war in 1945, he had a sense of purpose. The war experience "helped form the rest of his life," Craig says. Richard was married to A.J. Thrall's daughter Beverly, his high school sweetheart, and worked at the family company. "He returned to a company with approximately 18 employees and said, 'Maybe we can grow this,' " Craig says.

And he succeeded in growing it: By 1966, the company had 1,400 employees. The business evolved from repairing freight cars to building specialty cars, then to building commodity cars.

Craig worked in the freight car operation during summers when growing up. "I always knew that I was going to work for the family business, and as a result I didn't take academics very seriously," Craig says. (This was one reason the family decided, years later, to craft a policy that encourages family members to get a college degree and specifies that anyone who wants to work for the family business must have skills the business needs and be willing to start at the bottom.)

Craig graduated from college and received his MBA from Southern Methodist University in 1967. He then served three years as a Marine Corps officer in Vietnam.

Upon his return in 1971, Craig joined the company, which prospered over the next nine years. "We really built a wonderful team and were able to enjoy a respectable reputation as a new-car builder," he says.

But starting in 1980, several major changes occurred.

Between 1980 and 1983, the rail car industry crashed. "I had to take the organization down from about 1,600 people to 247," Craig says. "I was in the position of having to early-retire people my grandfather had hired 40 and 50 years prior."

The company had diversified in 1980 by buying The Chamberlain Group, a publicly held maker of consumer goods and defense products, and taking it private. Richard restructured and rebuilt Chamberlain as Craig restructured and rebuilt the freight car part of the business. Thrall Car grew again and was ultimately sold in 2001.

In 1983, Richard and his family bought the Thralls' interest in the company, though the two branches remain close. (Beverly Thrall Duchossois died of cancer in 1980.) With the ownership change, the family "reset the clock," referring to Richard Duchossois as the founder from that point onward.

One of the company's investments, the Arlington Park racetrack in Arlington, Ill., burned in an electrical fire in 1985. Craig took over managing The Duchossois Group while his father worked on rebuilding Arlington, which the family had acquired in 1983. It became "one of the finest tracks, not only in the country, but some would say in the world," Craig Duchossois says. In 2000, the company merged Arlington with Churchill Downs, home of the Kentucky Derby.

At around the same time, the company sold the defense portion of Chamberlain to General Dynamics, repositioning the company yet again. The Duchossois Group sold most of its divisions and created the investment company between 2011 and 2015.

The Duchossois family reduced its stake in Churchill Downs in 2015 and again this year, although the family still owns more than 1 million shares. Churchill Downs announced in June that Richard and Craig Duchossois will leave its board when their terms end within two years.

JoAnna Sohovich, a former U.S. Navy officer and executive at Honeywell and Stanley Black & Decker, was named Chamberlain's CEO in early 2016. The family's "commitment to innovation and investment in the future" was one of the reasons she took the job, Sohovich says. "Innovation leads to transformation, which leads to reinvention," she says.

Chamberlain, which holds more than 350 patents, has pioneered innovations such as WiFi-connected garage doors and safety technology that causes a door to reverse if it detects something in its way.

Focus on family governance

Craig's daughter Ashley Duchossois Joyce, 42, didn't plan to be active in the business, though it was part of her life. She remembers accompanying her father to the company facilities on weekends. "My sister and I grew up every Saturday going to the plant with him and running around," Joyce says. "We knew what my dad did a little bit, but we were pretty removed."

Joyce built a career as a social worker. In the late 1990s, she started attending shareholder meetings and learning more about the business.

Then, about 10 years ago, family members began to participate in seminars on family governance. "We're a family that takes advantage of any educational opportunities, and we're really striving to make our family business succeed and be multigenerational," Joyce says. "What can we do to better ourselves?" These efforts led to the establishment of a family council and creation of a family constitution. The family also has a family office.

About seven years ago, Joyce says, "Dad really had this kind of 'aha' moment: 'Now is the time that I need to pass the torch.' " In the years since then, Craig has stepped up efforts to prepare the next generation of leaders.

The Duchossois Group's board consists of seven family directors and six outside directors. Three of the seven family directors are members of the third generation: Ashley Duchossois Joyce, Tyler Lenczuk (son of Craig's sister Kim Duchossois), and Kim Duchossois's son-in-law, Erich Struckmeyer. The other family members on the board are Richard Duchossois, Craig Duchossois, and Craig's sisters Kim Duchossois and Dayle Duchossois Fortino.

Lenczuk and Struckmeyer work full-time for The Chamberlain Group. Joyce is president of The Duchossois Family Foundation. The family worked intentionally to develop the three third-generation members for leadership roles in the business and the foundation.

"We are discussing succession planning, at the board level and within the family," Joyce says. Her children's generation, who are still pre-teenagers, participate in age-appropriate annual meetings.

"We want this to be a multigenerational family business," Joyce says. "We have worked very hard, with our family council and family office, at educating the next generation."

Empowering women

Four out of 13 of The Duchossois Group's directors—30%—are women. The WomenCorporateDirectors Foundation recently named The Duchossois Group as the recipient of its Visionary Award for Leadership and Governance of a Private Company. The award recognizes a company with a high-functioning governance process, family owners who give back to the community and a high level of commitment to diversity, particularly when it comes to women.

"They stood out," Susan Stautberg, founder and CEO of WomenCorporateDirectors, says of The Duchossois Group, because of the longevity of the company, the hiring of a female CEO and the high percentage of women on the board. "They seem to be very interested in trying to bring women up through the ranks, as well."

"The fact that a family-owned company has a woman CEO is not remarkable," Sohovich says. "But the fact that the Duchossois family brought in a woman CEO who was unknown to them, and really just looked at my professional qualifications through the interview process, is remarkable."

Donna Zarcone, president and CEO of the Economic Club of Chicago and a Duchossois Group board member, was one of the people who nominated the company for the award. Craig Duchossois "surrounds himself with strength and with a board that challenges [the family owners], and they listen to the board," Zarcone says. "They really want to take the organization to the next level."

When Sohovich was hired, for example, "I'm certain [Craig Duchossois] would tell you that he didn't start out looking for a female CEO. He was looking for the best candidate," Zarcone says. "But the fact that he's open-minded about what the candidate may look like or bring to the table is the benefit there—the commitment to diversity."

Commitment to philanthropy

The Duchossois family is known for its philanthropy in the Chicago area. The University of Chicago Duchossois Center for Advanced Medicine is named for the family. Another donation from the family endowed a curatorial position at the Art Institute of Chicago. Richard Duchossois' second wife, Judi, serves on the board of trustees of Loyola University Chicago.

One vehicle for the family's philanthropy is The Duchossois Family Foundation, a separate entity from the business for the past 32 years.

Recently, Craig Duchossois and his wife, Janet, and The Duchossois Family Foundation gave a $100 million gift to establish The Duchossois Family Institute at the University of Chicago Medicine. The gift will support research on preventing disease "by optimizing the body's own defenses and finding new ways to maintain well-being" by studying the interaction of the human immune system, microbiome and genetics, according to a statement from the university.

"What I've always been impressed with, being a lifelong resident of Chicago and being active in the Chicago business community, is the extent of the family's commitment to the greater community here," Zarcone says.

Kim Duchossois, 63, ran the family foundation until two years ago and remains its chairman.

Ashley Joyce, now president of The Duchossois Family Foundation, says she sees her work with the foundation as advancing similar goals as her social work did, only on a larger scale. She has worked to strengthen the foundation's board, which consists of eight family members, and to focus grant making in three areas: transformational impact, which centers on wellness; community, which gives smaller gifts to a wide variety of Chicago-­area non-profit organizations; and matching gifts, to encourage family members to make their own donations.

Joyce took over as president of the foundation around the same time that her uncle Bruce passed away and left a significant gift to the foundation.

"Ashley has been sitting in the wings and is very capable of taking over my role," says Kim Duchossois.

Looking toward the future

At the corporate level, too, there is a shift to the next generation. Kim Duchossois is planning to step off the board of directors at the end of her term. Her son and son-in-law serve on the board.

"I felt that it was time for me to step to the next circle back and let them continue to evolve," she says.

Meanwhile, the company is looking to the future. The Chamberlain Group recently moved into a new, state-of-the-art headquarters building, Sohovich says. The new facility offers energy savings, space for collaboration, and fitness facilities and walking paths for employees. "We're not just focused on how many hours people put into the job, but how productive they are," Sohovich says.

"I think there's a significant opportunity ahead for the company as it embraces technology and brings the wonderful history and experience in its marketplace, but also meld in new talent that can see a whole new path forward," Zarcone says.

Margaret Steen is a freelance writer based in Los Altos, Calif.

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.

York Athletics sprang from a little guilt, a storied history and the entrepreneurial spirit of five brothers who came together to compete with some of the most iconic brands in the world. While its roots go back three generations, the Boston-based lifestyle footwear company is a brand new family business whose first product, an understated sneaker, reached the marketplace in 2016.

"Most family business stories are about passing the keys to the kingdom to the next generation," says Kyle York, one of the five brothers. "We're not doing that. It's three successive generations of self-made individuals. We didn't take the family money and reinvest it in the business. We all went out and earned our own money and are now investing it in a new family business."

The brothers—Travis, Evan, Kyle, Tyler and Dylan York—put their heads and their wallets together to create a venture to carry the family legacy into the future. Their story features three separate companies interwoven by family ownership. It begins in 1946 with the founding of Indian Head Shoe Company of Manchester, N.H., makers of iconic high-top cleats for football legend Johnny Unitas and ice skates for Olympic champion Peggy Fleming. The York brothers' grandfather, Henry Spaulding, and his brother-in-law, John Danos, founded that company, which went out of business in the 1970s.

Before the shoe company folded, however, it spawned an outlet store that was purchased and transformed into Indian Head Athletics by Henry's daughter, Gail, and her husband, Don York. The two were high school sweethearts; Don was a local football star. Don and Gail created a successful retail store based on knowledgeable customer service and carefully cultivated relationships with local schools and teams. They also raised five sons who worked in the store growing up but went their separate ways, at their parents' insistence, as they entered the workforce.

"None of us went down the path to take over Indian Head Athletics," says Tyler York. "When we were growing up, Dad always said he wanted something better for us. If any of us had insisted on it, he would have opened the door and taught us everything he knew. But without him, I don't know that the company would have lasted that long."

The five brothers created the third company, York Athletics, to keep the family's entrepreneurial spirit alive. "I've always been interested in the history and heritage of our family. I was also long interested in establishing a fashion brand. About three years ago, those interests collided," explains the eldest brother, Travis York. He gathered his siblings to talk about it in 2013. "There was a general agreement right out of the gate that doing something as a family business made sense. All of us felt a little guilty that we weren't taking on the sporting goods store, but the reality is a brick-and-mortar retail sporting goods store isn't the most relevant business for the future."

What they founded instead, York Athletics, is an Internet-based, direct-to-consumer company selling uniquely styled athletic shoes that aren't slathered with logos. They're moderately priced at $100 to $120 per pair and designed to give the wearer a natural feel underfoot. The first model was dubbed "the Henry" in honor of their grandfather, and the style number is the Zip code for Manchester, home of his factory. A thousand pairs were sold in the first six months. That might not have sent tremors through the halls of Nike or Adidas, but it pleased the five brothers.

"We are five boys and our parents owned a sporting goods store, so obviously sports and competition were a big part of growing up," says Travis. "But we've always been more 'five brothers against everybody else' rather than competing among ourselves."

That take-on-all-comers attitude came directly from their father, Don, 65, a jocular, hard-working, old-school retailer who watches the new venture with paternal pride. "I was concerned because of the nature of the business," he says. "I had seen what imports had done to their grandfather, and it was a huge risk. Their answer to me was, 'You've always told us, if you don't take risks in life, you'll be kind of boring.' "

The original business, Indian Head Shoe Company, lasted 30 years before it drowned in a tidal wave of foreign competition. According to U.S. census data, imports' share of the athletic shoe market increased from 39% to 68% between 1970 and 1976, the year the company declared bankruptcy. At its peak, Indian Head was producing 1,000 pairs of injection-molded shoes a day as a supplier to Hyde Athletic Industries. One of its biggest sellers at the time was the O.J. Simpson "Juice Mobile." Hyde bought the assets of the company out of bankruptcy and was itself eventually merged out of existence.

Travis and his brothers are well aware of the dangers of competing against global conglomerates, but they structured York Athletics to navigate the pitfalls by hiring a non-family CEO with extensive industry experience to run the new company. Mark McGarry, 38, was formerly head of the lifestyle footwear business at Puma and had been contemplating starting his own fashion brand with his wife, Elizabeth, who designed shoes for Nike and Reebok.

"We want to maintain control over the brand and the company," McGarry says. "That's a very important driver for the future, and we have to figure that out from a financial standpoint."

Other outside partners were brought in as well. Kyle met Jay Bush of baked-bean company Bush Brothers & Co. at the Transitions East conference in 2014. The two discovered several areas of mutual interest. Bush joined the York Athletics board and became a lead investor in the new company. The other board members are McGarry and Travis and Kyle York.

Financing of the new venture was carefully thought out. "There was an original 'friends and family' round of funding when we didn't even know what the company was going to be," Kyle explains. That group, which consists of the five brothers, evolved into the largest shareholder in York Athletics. "After that, we did an official York Athletics round, during which several angel investors like Jay Bush and Mark McGarry came in," Kyle says.

As the company's financial needs grow, the brothers are adamant about how they will be met. "We will not raise institutional private equity or venture capital, because we don't want Harvard MBAs on our board reading spreadsheets and telling us how we're doing," Kyle says. "We're funding this with like-minded individuals and family offices. We don't want the dynamics of the family business to change."

One of the new company's competitive advantages is the bench strength contributed by the York brothers. They have all been successful on their own, which gives McGarry and his team a solid group of engaged owners. "Travis and Kyle have been amazing partners," McGarry says. "They come to the table with their strengths, and they also know what ours are. There is a lot of trust going both ways."

Travis, 38, is the owner and CEO of GYK Antler, a marketing agency with 100 employees and $20 million in annual billings. Evan, 36, is vice president of data analytics for GYK Antler, while Tyler, 28, serves as a video producer for the agency.

Kyle, 33, is chief strategy officer at Dyn, a $100 million Internet performance company. (On Nov. 21, 2016, Oracle announced that it would acquire Dyn, which had been the target of a massive distributed denial of service attack in October 2016. Kyle led the deal from Dyn's side and was the company spokesman after the acquisition was announced. He plans to stay on after the transaction closes.)

The youngest York brother, 22-year-old Dylan, is a senior at the University of New Hampshire who interned as a project manager at York Athletics when it opened.

"Of the brothers, Kyle and I are the most entrepreneurial by nature," Travis explains. "Historically, I haven't been involved with true startups, whereas he has, especially on the tech side. Kyle is financing-focused. I am more marketing- and branding-focused. Our brother Evan is on the research and analysis side. Our brother Tyler is a storyteller/filmmaker. Our youngest brother, Dylan, is kind of our grunt," he adds with a laugh. "That's what youngest brothers are for, aren't they?"

Dylan also laughs when told how his brother describes his role. "I don't mind," he says. "I've been working at Travis's marketing agency for the last three summers, so I'm really into business now. I don't know what I'm going to do after graduation. Travis suggested I try to expand my repertoire of experience a little bit by working elsewhere for a while. Eventually, I'd love to work closely with York Athletics."

"I was very touched that our children recognized the value of their heritage," Gail York says. "I valued what my parents did. They were very honorable and involved in the community. Don and I tried to instill the value of family in the boys. You never know with kids what they get and what they don't get, so when I first heard about the idea it really hit a nerve."

"There was a method to Gail's and my madness," Don says. "It was family first, business second, and it was not going to be compromised. The boys are doing that with their families, and we're very proud of that." The three eldest brothers, Travis, Evan and Kyle, have seven children between them.

The official launch of the new company was marked on Jan. 4, 2014, which would have been Henry Spaulding's 100th birthday. Don and Gail, their five sons with their wives and kids, and the McGarrys and their two children gathered in a private room at a local restaurant. "It was almost like a giant group therapy session," Tyler recalls. "We all spoke about our relationships in a very open way." The discussion, Tyler says, helped the McGarrys "to understand us and our relationship with our grandfather and our parents and each other. It was very emotional."

"In the beginning, knowing this was a family legacy, we went through the archives and looked at some of the original manufactured footwear and picked up some styling and design cues," Elizabeth McGarry says. "We knew we wanted to design a sneaker that is timeless yet still performs on the field."

Will the family history matter to York Athletics' customers? "I honestly don't care," Tyler asserts. "It matters to us."

The York legacy is being given a bigger role in the brand's marketing efforts. "When we first launched the brand," Travis says, "the family story was very much behind the scenes. When we brought that forward, we started seeing positive results." He adds that nostalgia is not the only reason. "In all honesty, we're all businesspeople. If the family story had to go into the background to make the brand successful, we'd be totally fine with that."

The new company has been launched and the original one relegated to the history books, but what about the second York family business, Indian Head Athletics? "Gail and I are in the planning stages now," Don says. They're in no particular hurry to make a move. "Our fifth son will finish college this spring," Don says, "and we don't know if we will sell it or liquidate it."

All eyes now are on York Athletics. Travis believes the future of the new company is essentially limitless.

"We will evolve beyond footwear," he says, "although it will always be a focus." Apparel is a given, he says. "I can also imagine us having handfuls of mom-and-pop retail locations in key markets and even expanding internationally where our mindset resonates," he adds. "I can also imagine us taking on a strategic partner."

"I don't care if it's the next billion-dollar company with worldwide recognition," Tyler says. "All I care is that the legacy of the family brand lives on."

Dave Donelson is a business writer in West Harrison, N.Y., and the author of the Dynamic Manager Guides and Handbooks.

A Seven-Story Legacy

In addition to starting York Athletics, the five York brothers made another investment in their family's business heritage in 2015 by purchasing the historic building in Manchester that once housed both the original shoe manufacturing company and the outlet store that became their parents' business. The 55,000-square-foot building known as the 7-20-4 Cigar Factory Building was originally home to a cigar maker that went out of business when Cuban tobacco could no longer be imported after Fidel Castro came to power. The Indian Head Shoe Company bought the building in the early 1960s but lost it along with the other assets in the bankruptcy.

"My dad actually got evicted from that building when the shoe manufacturing company went bankrupt and the building was sold," Kyle York says. Don and Gail York's retail operation moved to its current location in Manchester across the street from a local hockey arena.

Travis York's marketing agency, GYK Antler, moved into the building not long after the brothers purchased it. They also devoted part of the building to a mini-museum housing some of the footwear and ice skates manufactured by the shoe company, along with a trove of old photographs and advertising material.

CEO Mark McGarry and his wife, designer Elizabeth McGarry, live in Boston, so York Athletics is currently headquartered there instead of in Manchester. But relocation might be a possibility in the long term. "We own the building, we all live nearby, the [relatively lower] cost of talent is exceptional," Kyle says, "so it would be really excellent if at some point it became the headquarters." — D.D.

Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.
 

Star Lumber & Supply, based in Wichita, is the largest locally owned building materials corporation in Kansas, with about 325 employees and annual revenues of approximately $110 million. The company, which is celebrating its 75th anniversary this year, is led by third-generation members Chris Goebel, 56, chairman of the board and CEO, and his cousin Patrick Goebel, 43, president and chief operating officer. Star has eight locations in Oklahoma and Kansas.

The company has navigated a rocky path since the 1990s. Star Lumber ended its venture into "box store" retailing in 1997, changed its business model from business-to-consumer to business-to-business, and survived the recent Great Recession by reevaluating its departments and closing underperforming locations. The company, which employs 19 family members full-time and more fourth-generation members part-time during summers and school breaks, is now focusing on succession planning and leadership development efforts.

"A family business is part science, part art, and a lot of emotion," says Chris Goebel. With the fourth generation preparing to take on more responsibility, Star has been working "to put a little more science in our game," Chris says.

Early growth

Brothers-in-law Earl Goebel and Bob Vosburgh founded the company in 1939. Earl, a Wichita contractor who lacked a high school education, had been buying lumber from traveling salesmen and selling it to area contractors. Bob, who had been a salesman for a sash and door company in Texas, was looking for an opportunity that would keep him closer to home. The two became business partners and opened their first store on the outskirts of the growing community. Soon afterward, Bob left the partnership to open a wallpaper store.

During World War II, Wichita was poised for growth, owing in large part to the aviation industry and bomber production. The city's population would double between 1940 and 1945. Everything was in short supply, including lumber and housing. The resourceful Goebel family salvaged lumber from refurbished boxcars and recycled bottles to fill with turpentine and oil for their customers.

In 1952, the family razed their 800-square-foot store to build a new 1,500-square-foot location. Two years later they purchased two Navy forklifts at a California surplus auction and added a 10-acre yard next to the rail yards to serve as a central storage and distribution center. When Star Lumber & Supply Co. was incorporated in 1956, the company reported assets of more than $700,000; by the 1960s, the business had reached nearly $2 million in annual sales. All of Earl's 16 grandchildren worked for Star Lumber. Today, ten third-generation members are employed in the business.

After Earl's death in 1965, his sons Bill and Bob became president and vice president, respectively. Family legend tells of Bill "pushing around concrete" in slacks and a tie, ruining the business attire in the process, says Bill's son Chris. Bob, who was known as an innovator, introduced advancements in technology that would improve accuracy and workflow.

Successful new product lines, such as carpet, necessitated the construction of a new store in 1966; its retail and warehouse space totaled 63,000 square feet. Over the next three decades the business continued to expand. The owners built a truss plant, added computerized accounting and inventory systems, and expanded operations through new store construction and acquisition of competing and complementary businesses.

Bill retired in 1989; Bob followed suit in 1990. Chris Goebel became Star Lumber's president and CEO at age 31 in 1989. Chris, the oldest member of the third generation, started working full-time at the truss mill at 14. After graduating from college, he became a licensed contractor and oversaw new store construction and renovations. Later, he moved through several sales and management positions, gaining knowledge and earning the respect and trust of co-workers and family.

Within a few years of Chris's appointment, half the company's revenues came from retail sales. The workforce was almost 500 strong. But then box stores began to penetrate the Wichita market.

Strategy shift

The Goebel family's initial response to the new breed of competition was to face it head-on. In 1993, they built a 100,000-square-foot home center and filled it with inventory that rivaled their competitors'.

But the move was ill timed. Interest rates soon rose and housing starts tumbled in the surrounding three-county area. Star's sales couldn't support the cost of the new store construction and higher-than-projected operating expenses. "The boxes make it mostly because they're full of part-time people, and that's just not the service level we were used to running," Patrick reflects.

By January 1998, Star had closed its box store to focus on service to its core customers—professional builders. In the process, the company drastically reduced its SKUs from 25,000 to 7,500 and dropped entire departments like lawn & garden. "We had to really take a very close look at what we were good at and narrow our focus," Chris recalls.

"We got really good at service—and service that pros value," says Patrick, who is the son of Earl's youngest child, Mike.

Today, about 90% of Star Lumber's sales are to professional builders. Its remaining retail sales are mostly project-oriented, such as selling and installing floors, windows and siding. "Very seldom do we sell product only," says Chris.

A change the company made in 1995—before the box store was shuttered—made detailed analysis of each profit center possible. Management was restructured into three company divisions. While some functions, such as human resources, IT and accounting, are handled at the corporate level, each division is responsible for its own sales and marketing efforts, as well as sourcing and delivery of materials. The reorganization resulted in better alignment of sales and support operations and reduced conflict between managers and their teams. "It had a huge impact on our performance," Patrick says.

Star acquired 20 more businesses between 2000 and 2004, including a truss company that specialized in commercial and multifamily properties and dovetailed with Star's existing single-family residential truss operation.

Military construction proved to be a boon to the company. When the U.S. Army First Infantry Division returned from Germany to its home in Fort Riley, between Junction City and Manhattan, Kan., in 2006, additional housing needed to be built for 9,700 troops and their families. Star Lumber provided materials down to the window blinds, including fabrication of safe rooms for each home. This contract was followed by another at Fort Sill in Lawton, Okla. Star continues to work at Fort Riley and is preparing to start a project at McConnell Air Fore Base in Wichita later this year.

Challenges of the Great Recession

Before the recent economic downturn, Star Lumber was generating annual revenues of more than $125 million. But when the bottom dropped out, home ownership in Wichita fell from around 70% down to 61%; in 2008 housing starts were at their lowest in 17 years. "Our best customer went two months without pulling a permit," says Patrick. Star's sales fell dramatically. A wage and hiring freeze was put in place, and employee training and development programs were halted.

Between 2008 and 2011, Star reduced its workforce from more than 500 to about 285 employees. "We basically stopped hiring people, except in extreme cases, and did everything we could to shuffle the team around into the best spot for them so that we could hang on to as much experience as we could," Patrick recalls. "I think that was a good call, because we are pretty strong across the board in many positions, and we have had good candidates for many of the positions internally as they have opened up."

No family employees were laid off, Patrick says, "but some members of the family have successfully sought careers outside the company."

The combination of rural population declines and an excessive number of competitors led to the decision to close Star's locations in Salina and Hutchinson, Kan., in 2011 and 2012. "There just wasn't room for us," says Chris. Even without the stores, the company continues to serve contractors in those areas by delivering from other locations.

The recession took a toll on Chris. "Even though I was only 54 years old, after 21 years I'd been through the wringer quite a bit," he says. "We were chopping and cutting and cutting and chopping and trying to survive this thing. It was tearing me up."

As the company struggled, Chris realized he needed help in making the myriad decisions that could affect Star's ability to survive the downturn. In 2010, Chris promoted Patrick, who had been senior vice president of the building materials division, to president and COO; Chris became chairman and CEO.

"I think you can observe things over time that makes heir apparents, apparent," Chris says. "You're looking for traits, and they show up, and they're there... I could see Patrick's traits for years and years, and so could a lot of other people."

Chris compares Patrick's promotion to tagging a teammate on a wrestling squad. "I reached over and tagged my teammate, [who] came in and drove us through the last couple of years of the recession," says Chris. "He made the fine tunes during the last part of the recession to reshape [the business]."

During the recession, "We very carefully adjusted our expense structure to respond to a change in demand, but we also aggressively sought out new opportunities," Patrick says. The opening of Star's Manhattan, Kan., location just ahead of the recession in 2006 led to military housing work, which produced revenues during a time when other parts of the company were struggling. Star also added a location in Lawton, Okla., during the recession to serve the military housing market there. In addition, Patrick says, the company made a strong entry into the flooring market in Oklahoma City, an area relatively insulated from the recession, in 2007. "Fortunately, all those moves led to growth and didn't result in just creating more overhead," Patrick says.

Former president Bill Goebel, Chris's father, passed away in 2006. Second-generation member Bob Goebel remains on Star Lumber's board and is very active in the community. "Chris and I usually talk with Bob to get his thoughts and give him heads-up on any major deal," Patrick says.

Because of the economic downturn, development of the fourth-generation family members was postponed, Patrick and Chris say.

"Some of the G4s in that time have gone to college and gotten married, and some of them are still doing the same jobs they were doing when they were growing up in high school," says Patrick. "We weren't really pushing them, because there was no place to put them." The eldest members of G4 are in their 30s, while the youngest are still toddlers. Nine G4s have full-time jobs in the company.

Looking toward the future

Today, Patrick says, he and Chris are trying to put some fourth-generation members in higher-level positions. "You have to put them in an area where you can carve out some accountability," Patrick says.

"You want to give them challenges and opportunities for successes," Chris adds.

The next generation is encouraged to get advanced degrees. "When we talk to them about MBAs, some of them swallow pretty hard," says Chris. "But we're not saying an MBA's a requirement just because six of our generation had MBAs. That didn't guarantee us anything." One-on-one coaching and a mini-MBA model are also on the table for those who want to advance in the family business, Chris notes.

"We just want them to be students of the game," says Patrick.

Fourth-generation member Kevin Goebel, 32, who works in outside sales, says the third-generation company managers have been rotating the G4s through different functions in the company. "We don't spend more than about a year in one position," Kevin says. During the recession, the next-generation members were moved to where they were needed most, and "stayed in positions probably longer than we normally would have, but we all understood what was going on," Kevin reflects.

Kevin, who is Chris's son, notes that he has moved "from the bottom up." He built doors and made deliveries; later, he ran those departments.

Mentoring is an important component of leadership development within the company. Kevin is being mentored by his uncle Vince Goebel, a company buyer. The relationship is mutually beneficial, Kevin says. "He can bring me up to speed on what's going on in the market"; in turn, Vince seeks Kevin's input on new products.

Kevin says the third-generation members have been asking him for advice. "I don't know if it's just because I'm getting older and figuring the business out more than I did before, or if they're just kind of looking for new ideas," he says. And as his younger cousins are starting to move up through the ranks, Kevin is serving as a mentor to them.

When it comes to advancement, being a family member has its advantages. "They've been around here forever, and they've got access to anything," says Patrick. However, he notes, "Everybody has to apply for the positions they want to be in," and family members must demonstrate leadership and initiative.

"The key non-family members are watching family members carefully, and they're handicapping us," Chris says. "We're watching the G4s to see which ones the key non-family members hitch their wagons to, because that's who our G4 leaders are going to be."

Chris is a charter member of the Kansas Family Business Forum, established in 1995 by Don Hackett, director of the Wichita State University Center for Entrepreneurship. The Goebel family has benefited from the educational and networking opportunities offered through the forum as well as the Young Presidents Organization.

Patrick describes Chris as a "student of the family business side" and credits him with doing the groundwork to perpetuate the business. "The way we've got it all set up, it could go forever," says Patrick.

The company joined the Kansas Family Business Forum at a pivotal moment in its history. "The G2s wanted to take the business a little further, [and] we were just being taken over by the G3s," says Chris. "It was a great time to take the family business to the next level."

Today, Star Lumber has 27 stockholders. Stock in the operating company can be owned only by bloodline family; spouses may own an interest in the family's real estate holdings. Owners have an opportunity once a year to invest more in the company, or sell or gift to other family members. "We're doing best practices, and we value our stock every year and have an exchange, and some things that are a little more advanced concepts," says Chris.

The company holds three board meetings and two stockholder meetings every year. The nine-member board includes three outside members, described by Chris as "CEO peers of the CEO." Mike Goebel, Patrick's father, attends board meetings in an advisory role. In addition, all active family members convene a couple times a year for information sharing and feedback.

When one family member retired from the board, she made Chris promise that her position would be filled by an outside director, because she knew "her investment would be in better hands," Chris recalls.

"I always look forward to our board meetings," says Patrick. "You can count on a good, robust discussion. It forces you to rethink everything, and it does a better job for the family. We won't make a big decision without having board approval."

In 1989, the year they organized the company as an S corporation, the family founded the Goebel Family-Star Lumber Charitable Foundation. Eight percent of the company's pretax profits are given to the foundation, which focuses on community-wide projects that help youth.

The family has been a long-term supporter of Starkey Inc., a non-profit organization in Sedgwick County, Kan., that serves people with intellectual disabilities and dementia. In 2010, the Earl and Mathilda Goebel LIGHThouse project supported the construction of three homes for Starkey clients.

This year, Star Lumber celebrated its 75th anniversary not only by publishing a history of the company, but also by partnering with Wichita Habitat for Humanity to underwrite a neighborhood, and funded construction of the community's final home.

Chris, who describes himself as a "field general" like his father, recalls a lesson he learned around the age of eight when he was helping his father and employees install a roof on a Star Lumber location. It was evening, and the hammers were flying as they tried to finish before going home. That's when Chris discovered that everyone's box of nails was empty. "If you're working a crew," Chris says, "you have to anticipate what's going to happen next and be there ahead of everyone—or the whole things shuts down."

Sally M. Snell is a writer based in Lawrence, Kan.

Copyright 2014 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com    

Some iconic names in family business are providing us with valuable lessons. As the adage goes, "There's a time to hold 'em and a time to fold 'em." The recent decisions by the Washington Post Company to sell its namesake newspaper and by the Forbes family to explore a sale of Forbes Media LLC show an appropriate concern for the long-term interests of their shareholders. Their decisions also show foresight and courage.

These are clearly large companies and household names, but the lessons they can teach us apply to family businesses of all sizes, in every industry.

At the family-controlled, publicly traded Washington Post Company, a decline in print advertising revenues forced change. The chairman, Donald Graham, and his publisher and niece, Katharine Weymouth, went off-site to quietly consider what the company's flagship newspaper would look like three years down the road. They concluded that the Washington Post, under its current ownership, would not be a competitive business.

Forbes magazine, like the Post, has seen ad revenues decline in recent years. But, as the Wall Street Journal reported, different factors are at play for the Forbes family. An upcoming financial repurchase obligation (of a 45% equity interest held by a private equity firm) places a big bet on the actual value of Forbes' print and digital businesses. Given the market realities facing the publishing industry and despite the reported financial promise of Forbes.com, is it worth betting the family capital to stay on course? The Forbes family has retained a financial adviser to explore a sale of Forbes Media LLC.

The common theme for both family-controlled companies is that the publishing business has changed quickly and fundamentally. Similarly, shifts in demand (how customers will want to receive content) and in the revenue model (who will pay for that content, and how much) will affect every business sooner or later.

Take time to reflect

Many family businesses are so consumed with running their day-to-day operations that they don't take the opportunity to step back and consider the future. Are they driving their business or being driven by factors outside their control? The question relevant to every business is, "In x years, will our customers still want to buy what our company is selling?"

What will these developments mean for your family business? Your company's history may be a great source of pride and inspiration for employees and family shareholders. However, not paying attention to the need to generate positive cash flow will put family capital at risk. Most families don't have the resources to fund negative cash flows for very long. An adherence to the "We've always done it that way" approach can put you out of business.

Inspiration in an empty office

In July 2011, Washington Post columnist Thomas Heath wrote about MyerEmco, a family-owned chain of consumer electronics stores. The company realized (too late) that changing consumer buying habits had drastically changed its market. It was competitively crushed between the forces of the Internet and the big-box retailers. MyerEmco went out of business. With personal guarantees of MyerEmco's corporate debt, the family lost almost everything.

Subsequently, as Heath described it, MyerEmco president Jon Meyer sat in his (then) empty office and wrote on a sheet of paper how his former market had changed and, more importantly, what that change implied going forward. He concluded that families (as opposed to individuals) would be making the electronics purchasing decisions. Further, he had seen a growing demand for sound systems throughout the home (as opposed to the purchase of individual components). Still in control of a database of MyerEmco's 280,000 former customers, he reinvented the company as MyerConnex, which now sells and installs sound systems. It is a much smaller company, but it is profitable and growing. It's too bad Meyer didn't do the writing exercise a few years earlier.

Action steps

What lessons can be learned from these family businesses? Here are a number of steps to take now. Don't wait until there are few attractive options left for your company:

1. Consider how your market will have changed three to five years from now. Will your customers still want to buy what you are selling? Given trends beyond your control (e.g., technology, consolidation, shifting demand and regulation), will customer demand be moving toward your service/product offerings or away from them?

2. What will your competitors look like? Will the little guys still be around? Will the larger firms consolidate?

3. What can you change within your product/service offering to better competitively position your company? Can you afford that investment? Are your family shareholders prepared to be patient and defer distributions?

4. If this forward-looking exercise provides a clear path, then make it happen. Invest in the human capital, production facilities, systems and R&D that are required. Sell your new vision to the family shareholders; explain why these steps are necessary and how attractive returns will be generated for all family owners.

5. If your three- to five-year outlook is bleak and you don't see a clear path to change it, go to Plan B. Do as the Graham family did when they made the wrenching decision to sell the Washington Post Company's media assets to Jeff Bezos, founder of Amazon, and as the Forbes family is currently considering.

New avenues

Years ago, the Washington Post Company (recently renamed Graham Holdings Inc.) began to acquire non-media businesses, which now include Kaplan Education; a majority stake in Celtic Healthcare, a provider of home health care and hospice services; and Forney Corporation, a supplier of industrial furnace parts. This diversification will allow the Graham family and its public shareholders to continue in business—the same shareholders, just no longer in the newspaper industry.

Two members of another iconic business family, brothers J.B. and Tony Pritzker, also have started a new family venture with their share of the distributions from the breakup of the Pritzker family empire. Via their investment firm, Pritzker Group, J.B. and Tony Pritzker have been investing in private (often family) companies. These include businesses that need growth capital or liquidity (preferably from patient investors) and find the longer-term perspective of Pritzker family capital to be appealing.

What's the takeaway? From time to time, look up from your desk and make sure you're not driving your business into a tsunami. Often a very high-level perspective can be most helpful and illuminating. The process itself doesn't have to be complicated. Remember that Donald Graham of the Washington Post Company had a quiet but very thought-provoking off-site meeting. Jon Meyer of MyerEmco developed his plans on a piece of paper in an empty office after the loss of his family business.

As your vision comes into focus, there are many resources to help to you formalize and implement change. If it's scary out there, consider taking your family into a different, more attractive business. As hard as these decisions are, they will give you and your family shareholders a rallying point. You will have a business to get excited about once again.

Patrick O. Ring is managing director at Headwaters SC in Baltimore (pring@headwaterssc.com).

Copyright 2014 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.