Furniture Maker Can’t Afford to Sit on Success

0
Furniture Maker Can’t Afford to Sit on Success
Karen Rosen Hirsch

Republic Furniture Manufacturing Inc. shipped a big order to the Borgata Hotel Casino & Spa in Atlantic City, N.J., last month, capping a two-year span that saw its revenue more than double over 2010 levels.

That would generally be a cause for celebration, but for the Vernon maker of high-end couches and chairs, the jump to $1.7 million last year from $750,000 in 2010 meant only that it had clawed its way back to where it had been before the recession.

The 50-year-old company, which now delivers high-end seating primarily to the hospitality industry, came out of the recession a much leaner operation.

Judy Rosen, the company’s vice president and the daughter of co-founders Leonard and Eve Rosen, said Republic was forced to lay off about eight of its 31 employees in 2010, some of whom had been at the company for 30 years.

“You never want to lay off people,” she said. “Our employees are like part of our family.”

It was a hard lesson for a small business that positioned itself to rely on sales to a relatively narrow segment of the furniture-buying market. It was of little consolation that Republic did not take the hit alone.

“Everything was shut down in the hotel business from 2008 to 2010,” said Richard Heyman, managing partner of Hollywood hospitality development firm Five Chairs.

When the recovery began to take hold in 2010, Rosen and her sister, company President Karen Rosen Hirsch, were faced with an opportunity and a quandary: Orders were picking up, but Republic had to manage the uptick in business in a thoughtful way.

They secured a contract to provide couches and chairs for the Bellagio hotel and casino in Las Vegas. The contract, which they got through a competitive bid process, helped bump 2011 revenue up to $1.8 million and last year’s sales to $1.7 million.

Orders from Republic’s other clients were also picking up as old customers, who had been quiet for four or five years, finally had some money to spend.

Facing increasing orders, the sisters had to manage with discretion. They didn’t greatly increase their workforce, only hiring when they got big orders. They paid workers on a per-piece basis instead of an hourly rate.

Helena Yli-Renko, associate professor of clinical entrepreneurship at USC, said even if things are really starting to pick up, she has seen small businesses remain wary of increasing employment. They carefully watch their cost structure, avoiding taking on debt to meet increased demand.

“Small businesses are trying to grow in a more strategic, risk-managed way,” she said. “They avoid overleveraging. If they need more staff, they use contractors or part-time workers.”

Pittsburgh roots

Though it’s been in Vernon since 1963, Republic has its roots back east.

Karen and Judy’s grandfather, Morris Rosen, had a furniture store, Republic Furniture, in Pittsburgh. Their father, Leonard, moved to Long Beach and opened his own furniture store in 1948. He started making furniture in 1963 and adopted the Republic name to honor his father.

Karen, who had worked as an interior designer, and Judy, who had worked for the U.S. military as a recreation director and, later as a social worker, took over the business when their parents retired in 1989.

The company has always produced its products domestically, an outlier in some ways as many companies take advantage of cheaper labor overseas. Rosen said Republic can’t compete with these companies on price, but that in the high-end market, manufacturing locally is an advantage.

Purchasing agents, she said, want to know where the product is produced. At the high end, they don’t want furniture that’s manufactured overseas.

For the last several years, Republic has focused on making chairs, sofas, banquettes and ottomans for the hospitality, commercial and residential design industries.

It landed big contracts for couches with the Borgata, Bellagio and Aria Hotel at CityCenter hotel casino in Las Vegas.

While there have been ups and downs during the company’s history, nothing compared with the hit it took when the recession began in 2008. Hotels, their major clients, suddenly stopped purchasing.

In addition to cutting staff in response to the falloff in business, Rose and her sister took on work reupholstering furniture, something they had never previously done.

In late 2010, as the hotel business began to pick up, demand for new furniture to renovate hotels increased.

Robert Mandelbaum, director of research information services at PKF Hospitality Research in Atlanta, said while new development of hotels was still limited, demand for the renovation of existing properties has increased. Many hotel chains also became stricter about their brand standards, pushing hotels to upgrade their facilities.

So despite coming back leaner and using the woman-owned designation as an advantage, the outlook for a hospitality-focused business remains uncertain.

Rosen said that with the completion of the Borgata order, the company does not yet have another large hospitality contract in place.

“There still isn’t much money,” she said. Hotels still don’t provide many projects and competition is fierce.

No posts to display