In 1931, with the nation hunkered down in the Great Depression, those Americans who still had jobs were thankful. Those who didn’t—then as now—often had to move in with relatives.
A 27-year-old Sicilian immigrant named Bernard Castro, who had come to New York with his father 12 years earlier, worked as an upholsterer’s apprentice by day and learned English at night. With $400 in his pocket, he set out on his own to create something nobody had ever imagined: a sofa with a bed hidden inside. Though there existed at the time a cumbersome device called a davenport—a sofa with a hinged mechanism allowing it to lie flat—Castro is acknowledged as the inventor of the modern sofa bed.
It was the right product at the right time, though Castro took an enormous risk by starting a new business in the midst of the worst economic crisis the world had ever experienced. Like other entrepreneurs who launched their now-famous companies during the Depression, he found that risk had its rewards.
Castro’s convertible sofa beds made him a wealthy man, and his ad campaign made Castro Convertibles a household name in its markets. But in the 1990s, faced with competition from companies selling cheaper but inferior products, the Castro family sold their furniture business and focused on their real estate holdings. The Castro name disappeared from the furniture industry as the company that bought the business floundered and eventually ceased operations.
Two years ago, Bernard Castro’s daughter, Bernadette—who as a child starred in Castro Convertibles’ ads—decided to revive the Castro furniture brand, with a few new twists. In its new incarnation, the company is emphasizing its manufacturing operations rather than retail sales; the relaunch is taking place online; and Castro’s flagship (and, at press time, only) product is a fold-out ottoman, not a sofa bed.
The new ottoman is far more modest than some of Bernard Castro’s ideas. Though practical at heart, Bernard was a natty dresser with a wardrobe of custom-made suits and hats, and his lavish sense of style sometimes extended to the product. The “Scotch and sofa” model, for example, had a bar and stereo built into its ends. There was also the famous (pre-PETA) mink fan chair, designed with his wife, Teresa, in mind. The interior back and arms of the chair were covered in mink on an ornate wood frame with gold leaf accents. Only a few of each were sold, but they were conversation starters.
“My mother always said the hostess is the only one who doesn’t get to wear her mink [to a party]—so instead she gets to sit in it,” says Bernadette Castro, 66.
Targeting a market
Bernard Castro didn’t do any formal market research to see if his idea would have a receptive customer base. He didn’t conduct a feasibility study, compile demographic data or create a business plan with five-year projections of sales and profits. He didn’t have a high school diploma, let alone an MBA. It’s also safe to assume that in the throes of the Depression he wasn’t going to find venture capital, either.
But he did have keen intelligence and the foresight to observe what was going on around him: Lots of people in already cramped, tiny New York apartments were trying to accommodate either growing families or additional relatives and friends who needed a place to live. Given the times, they couldn’t afford a larger apartment—not that much was being built anyway—but they could potentially afford a sofa bed instead.
After World War II, Castro would again follow his instincts to seize another opportunity and harness the power of a new medium—television—to advertise his product. Indeed, Castro Convertibles was the first company ever to buy local television commercial time, in 1948, on the now-defunct Dumont network in New York.
Castro’s ad featured his four-year-old daughter, Bernadette, demonstrating how easily a customer could open and close a Castro convertible bed. “So easy, even a child can do it,” proclaimed the tagline.
The adorable little girl opening the sofa became a TV star, with more than 35,000 commercial and non-commercial appearances on television, including cameos on Milton Berle’s Texas Star Theatre and The Jackie Gleason Show. In later years, she parlayed that fame into a singing career, a political career in the administration of former New York governor George Pataki, and even a run for the United States Senate. Meanwhile, before it was sold Castro Convertibles had grown to dozens of retail showrooms in the New York City metropolitan area and Florida.
In 2009, when Bernadette Castro decided to relaunch the furniture brand, it had been retired for more than a decade. Unlike her father, before making the leap she did research to see if the brand still had any resonance. To her satisfaction, it does.
Focus group studies found that “virtually everyone over age 40 who grew up in the New York metro area remembered the Castro Convertibles name and the TV jingle,” she says. The successful businesswoman and former public servant still gets asked frequently if she is the same little girl from the old TV ad.
Both the original television ad and radio jingle, along with a host of other mentions of Castro, can be accessed on YouTube.
Business, not nostalgia
By the 1970s, times had changed. Numerous other furniture companies had copied the sofa bed concept and were selling much cheaper versions than Castro. Bernadette Castro by then was working alongside her father, involved in every aspect of the business. They realized, however, that the true value of the company lay not in the furniture, but in the real estate its furniture stores occupied.
Once again, Bernard Castro’s foresight saved the family business. As his stores prospered, landlords began demanding higher rents. He changed tactics, and by the early 1960s insisted that the company buy all its retail locations instead of renting them. That, says Bernadette, is what saved the company she now heads, together with her daughter, Terri Keogh, and varying degrees of involvement from her three sons, Jonathan, David and Bernard Austin. Her father, before he died in 1991, even gave his blessing to the idea of someday selling off the furniture altogether.
“My father said that when anyone’s dropping a cheap bed into furniture, we’re probably going to be just as happy in the real estate business,” says Castro. “We didn’t want to make a $500 sofa bed. We didn’t want to make anything we didn’t believe in.”
Today, commercial real estate is the primary source of the company’s profits. In 1993, the Castro Convertibles furniture division was indeed sold, to Krause’s Sofa Factory of Brea, Calif. Within a few years, the Castro brand vanished as Krause imploded. Bernadette Castro says she was disappointed but not surprised when Krause went out of business in 2002. “I was on the [Krause] board for a short period of time, and I didn’t agree with a lot of their strategies,” she says.
Now she’s excited about returning the firm to its roots as a furniture maker. Though the real estate pays the bills, it was the furniture that built the Castro brand. As pragmatic as her father was, Castro says, he still was emotionally invested in the furniture, and she couldn’t imagine selling the division while he was still living. That, together with a new need for small-space living concepts, led her to relaunch the furniture online (www.castroconvertiblesusa.com).
A company still evolving
One thing hasn’t changed at Castro Convertibles: the family focus. The various divisions of the company are each an LLC, with different family members having different titles. Bernadette Castro is a managing director of 95% of the family holdings. Daughter Terri Keogh, 43, is CEO of the real estate division, and Castro’s three sons—David Austin, 41, Bernard Austin, 36, and Jonathan Austin, 38—are involved in varying degrees, from silent investor to yogurt mogul. Not surprisingly, the family’s fourth-generation members—Georgia, Grace, Gwenyth, Josie, Finlay, Piper, Terence and Bernard—star in the online ads for the new ottoman, just as their grandmother Bernadette promoted the original sofa bed.
Bernadette Castro is divorced from her first husband, David Austin, and has been married for 32 years to Dr. Peter M. Guida, a now-retired professor of surgery at New York Hospital-Cornell Medical Center.
Along with the new furniture company, their real estate holdings and a golf club (Golden Hills Golf and Turf Club, Ocala, Fla.), the family is a Red Mango yogurt franchisee. Keogh, who calls it “the Starbucks of yogurt,” boasts that the family is the first Red Mango franchisee in the state of Florida, and now has three locations there. The all-natural, gluten-free probiotic yogurt is a hit with health-conscious consumers, she says.
Jon Austin runs the yogurt business, with Keogh. Castro herself isn’t involved, though with her television and political background, she was a natural to record the commercial spots for the yogurt stores.
David Austin is an attorney, and Bernard Austin is an architect. Neither is active in the family business, though all the siblings have a financial interest in it, and Keogh and Castro both will bounce legal questions off David for his perspective. Bernard, meanwhile, recently relocated from Santa Barbara, Calif., to open a New York division of his architecture firm. He’s renting space for his firm in Castro corporate headquarters, and Keogh jokes that with daily exposure to the business, who knows what that might ultimately lead to? But for now, the two sons who aren’t in the business don’t get too involved otherwise. The entire family might have one annual meeting together about the firm, says Castro, but nothing more than that.
Bernadette Castro says the goal of parents in a family business should be to eventually get out of the business. “That’s my goal!” she proclaims. But it’s almost impossible to imagine this energetic entrepreneur and former politician slowing down, let along stopping, especially now that she’s in the midst of conducting nationwide sales training for the newly revived furniture brand.
Learning by osmosis
Castro’s children were immersed in the family’s business ventures from an early age. “Anyone in a family business will tell you it’s a challenge to separate family from business,” Castro says. “Terri and I want to have a typical mother-daughter relationship, but we always end up talking business.”
“She’s my boss, but she’s my mom,” Keogh says. “So I wouldn’t talk to a real boss the way I can talk to her. I’m her CEO but also her daughter, so she can call me at 7:30 a.m. on a Sunday morning to talk business.”
Keogh says business and family have blended seamlessly all her life. “We talked about business at the dinner table,” she says. “We talked about real estate, mortgages, retailing. I took daily figures over the phone at ten years [of age]. I saw the comps and could say, ‘Oh, we’re doing better or worse here.’ It’s ancillary learning by osmosis.”
Keogh herself is an attorney who never planned on entering the family business. But again, as she jokes, life is what happens while you’re busy making plans. She was a prosecutor in the Kings County (Brooklyn), N.Y., district attorney’s office, handling cases that usually involved sex offenders and child abuse. The work was emotionally draining, and her schedule was intense, she recalls.
Her mother, meanwhile, was gearing up for a run for the U.S. Senate and asked Keogh to take a leave of absence to manage her campaign. She did, enlisting the help of some friends from law school. Later, when Bernadette Castro was named New York State Parks Commissioner under Gov. George Pataki, she discussed the appointment with Keogh before accepting.
“Who’s going to run the business?” Castro asked. The answer, they decided, was Keogh.
“It worked out for my life,” Keogh reflects. When she joined the company in 1995, she and her husband hadn’t yet started a family, but were hoping to. Running the family enterprise enabled her to work close to home on Long Island and to maintain a flexible schedule.
“I think I have the ideal job,” Keogh says. “While work is never really done, I can be involved with the kids, and be there physically for them.” Her daughters, now 14 and 11, play hockey, she says, and “I even go to their away games.”
Between the Castro empire and her husband’s partnership in a hedge fund firm, the daily blend of business and life is normal to Keogh’s children, just as it was to her and her brothers, she says. But, she adds, “The challenge is you can’t turn it off. I’ll drop the kids at my mom’s house and we still end up talking business: It’s cold, make sure the kids wear their sweaters, and by the way, do you have the paperwork on the 23rd Street building?”
Preserving the family values
When she first joined the business, Keogh says, she realized had much to learn and deferred frequently to her mother. Now, she says, Bernadette Castro often will defer to her. Keogh says she’s proud to be the steward of the family’s assets, and proud that her brothers trust her implicitly.
No matter what transformations the family enterprise had made or might make in the future, Keogh says, how the family does business hasn’t changed. “For our family, our word is everything,” she says. “We get screwed occasionally, because not everyone is like this, but I think that’s what sets us apart going forward.”
Will one or more of the six cousins eventually sit in the chairman’s chair?
“I won’t tell the kids they have to come into the business,” says Keogh. She’s a firm believer in having the next generation work elsewhere first. It helps them develop a new perspective, she says, and it will help them bring additional value to the business if they choose to join. But the most important reason to send them elsewhere first, she says, is so that they know they have a choice.
Hedda T. Schupak, former editor-in-chief of Jewelers’ Circular Keystone magazine, is a retail analyst focusing on the fine jewelry, fashion and luxury markets.
Sweet dreams
A Castro Convertibles sofa bed was built to last. Its heavy metal bolts required hard wood because the bolts would pull out of cheap, soft wood, according to Bernadette Castro, the daughter of inventor Bernard Castro.
Castro sofa beds were very heavy—ask anyone who’s ever had to move one—but with a surprisingly easy mechanism to operate. Castro says they were designed to be comfortable for every-night sleeping, not just for use by occasional houseguests. There was nothing that could compare to a Castro piece, and, in her opinion, there still isn’t.
“I don’t see anything like it now,” she says. “I’ve seen $300 versions [of a sleeper ottoman], but that’s not quality! Would you serve your guests a hamburger while you eat filet mignon? No!”
One of Bernard Castro’s ironclad rules was that every customer who came into the stores had to open a bed, his daughter recalls. And he meant every customer. No salesperson was allowed to let a customer leave the store until he or she had opened and closed a bed. So insistent was Castro on this that he periodically hired mystery shoppers to make sure the salespeople were complying with the rule. Those who did got a nice letter with a $50 bonus. Those who didn’t—well, says Bernadette, they got another kind of letter, and it had better not happen three times. It also was why a Castro showroom had plenty of space and there were no heavy cocktail tables positioned in front of the sofas.
Even before the launch of the new Castro website, there were, and still are, occasional discussions of original Castro pieces online, usually from people either waxing sentimental or asking where they might find a vintage one. The sofa bed, of course, was the flagship of the original brand, but a convertible coffee-to-dining-table and various other pieces were in the product lineup as well. A company called Reupholstery Division Corp. (www.castroconvertiblesreupholstery.com), licensed by Castro and run by longtime family friend Steve Green, specializes in reupholstering vintage Castro pieces.
Today Castro is re-entering the furniture market with just one product, a folding ottoman that houses a single bed. Though slightly smaller than a twin, a single-size mattress can use twin-size linens and doesn’t feel smaller to those who sleep on it, Bernadette Castro claims.
Though the new ottoman is available online at www.castroconvertiblesusa.com, it will be sold primarily through Macy’s. (It was rolled out first at Macys.com and launched in key Macy’s stores in March.) Bernadette Castro personally traveled to Macys.com headquarters and the Macy’s stores carrying the ottomans in order to train the sales staff. Like her father, she insisted they open the ottoman and lie down on it. “All were surprised by how comfortable it is,” she says.
But why downsize?
“A queen-size sofa bed is a major decorating decision,” says Castro. “The ottoman measures 33 inches—you don’t have to discard your existing sofa.” With a retail price of $649 (it occasionally goes on sale for $499), it’s priced significantly below what a Castro sofa would have cost. While Castro admits the price is a stretch for some consumers, she says quality is even more important for customers of limited means.
“They’re the ones who can least afford to buy a cheap product that won’t last,” she notes.
— H.T.S.