Gina Schaefer, Founder and CEO of A Few Cool Hardware Stores Shares her Strategy for using Hardware Stores to Serve and Empower Communities in the Washington Metro Area

VERNON OAKES: Good morning everybody. This is Vernon Oakes. Welcome to Everything Co-op. This morning we have the pleasure of having Gina Schaefer on, who has been an owner of ACE Hardware stores here in the Washington DC area, in the DMV. Good morning Gina.

GINA SCHAEFER: Good morning, How are you Vernon?

VERNON OAKES: I’m great, how about you?

GINA SCHAEFER: I’m great, thank you.

VERNON OAKES: Fantastic. Love your smile. And are you in DC now?

GINA SCHAEFER: I am. I’m in Logan Circle on 14th street Northwest.

VERNON OAKES: Okay. So we have a beautiful day out here today. The sun is out. It’s supposed to rain later, but it looks like it’s a wonderful day.

GINA SCHAEFER: It’s nice outside my window.

VERNON OAKES: So tell me how did you get into hardware stores, ACE Hardware in particular?

GINA SCHAEFER: So if any of our listeners have been around for a while they might remember that Logan Circle had been one of the communities in the country destroyed by the riots when Martin Luther King was assassinated. So, that was obviously a long time ago, but this neighborhood sat dormant for a long time until people started moving East in Washington looking for cheaper places to live. And I was one of those people. I wanted to buy my own house or condo before I got married. I was young and dating at the time, but Mark and I — my husband — hadn’t gotten married yet, and a real estate agent said, why don’t you buy in Logan Circle? And I mean it was a crazy place for a young single woman to move, but I did and I got involved in the community. And everybody talked about how they wanted a hardware store, and restaurants, and grocery stores, and all sorts of things that make a community vibrant, and fun, and safe. And then I got laid off from my tech job. And I came home from work the day that I was laid off and I said to Mark, I know exactly what I’m going to do, and I’m going to open a hardware store. And I always joke that like a good spouse he didn’t say one word.

VERNON OAKES: He didn’t say yes or no. He definitely didn’t say no.

GINA SCHAEFER: He didn’t say anything. I think I made him speechless.

VERNON OAKES: So you were in IT, got laid off, Logan Circle where’s that? 14th and…

GINA SCHAEFER: Well our first location was at 14th and P Street Northwest. We’ve since moved that store up the street to 14th and S, so not far but yeah, right in the heart of the commercial corridor of Logan Circle.

VERNON OAKES: So 14th and P right now is where, Whole Goods is at 14th and P?

GINA SCHAEFER: Yes.

VERNON OAKES: Okay, and what year was this that to all you bought?

GINA SCHAEFER: No, we opened the first location, from ground up. Actually I did and then Mark joined me three months later. He had a job. He had no intentions of being in the hardware business and one day he said, well you’re having too much fun. Can I join you? I think he was actually, you know in hindsight, he was working his full-time job and he was helping me so much that he just wanted one or the other. And it looked like we were gonna be okay, that I was gonna be okay running the business. But it was 2003. So I got laid off from that job in I guess it was late 2001. We contacted ACE Hardware and True Value which at the time was another national hardware cooperative. And we ended up joining the ACE co-op and we opened that first location about 10 months later, 2003.

VERNON OAKES: So had you had any hardware experience? Any business, entrepreneur, did you-

VERNON OAKES: No, did I need to? I love this question. I love this question, Vernon. So, I was 30 — I guess I was 31-ish, somewhere around there — and you know when I think back, oh my gosh I was such a baby. No I mean, that’s not that young, but I had worked for technology companies for three or four startups. I was seasoned at getting laid off because I kept working for startups that failed. I had worked in the nonprofit industry. I had a political science degree. I had never run my own business. I remembered when I was 12 writing a business plan. So when I think back to being a child and I had a very entrepreneurial mother, I think okay it’s in my genes. But I hadn’t done anything at all to nurture that, nothing.

VERNON OAKES: So you sound like my youngest daughter. I caught her one day [indistinct] and she was not playing dolls in a dollhouse. She had her business and she was had a phone, little pink phone, and she was taking orders and writing them down. And one day she gave her grandmother a pink slip because her grandmother didn’t do whatever she wanted her to do. So, she has business in her genes. So you had it in your genes with your mom being the entrepreneur.

VERNON OAKES: I did. Well, and Logan Circle was very supportive. The community was wonderful. I mean we wanted businesses. We had this beautiful, abandoned, commercial corridor that was just screaming with potential, and anything that opened, any of the businesses that opened were really supported by the community. So I had that going for me.

VERNON OAKES: Okay, well you have mother entrepreneur, wrote your first business plan at 12, and at Logan Circle. And Logan Circle at the time was inexpensive to buy?

GINA SCHAEFER: Yes.

VERNON OAKES: Okay and so you could come in 20 years later, 21 years later it’s a little bit different.

GINA SCHAEFER: Very different, yes.

VERNON OAKES: Okay so why ACE?

GINA SCHAEFER: Well you know, it was kind of a — I’ll tell the funny story in a short way — we contacted ACE and True Value at the same time and True Value didn’t call us back for about two years. And so the short story is we went with ACE because they’re the ones that called us back. I also sort of fell into it because ACE wasn’t sure if they were going to approve me, and the new business development guy that was sent to vet me and the neighborhood and the space that I picked told me to sign my lease before I was approved to join the co-op, which was backwards. I should have been approved before I signed the lease. So I signed a 1.9 million dollar lease in 2002 and faxed my application back to ACE and they, I mean, freaked out for lack of a better phrase, because he had lied to me. And so I got to open a hardware store because I had signed this big lease, but there was a lot of concern about whether or not it was going to be successful.

VERNON OAKES: And how many stores you have now?

GINA SCHAEFER: I have 13 darn it, 300 teammates. We are super successful. I’m not proud at all.

VERNON OAKES: Well you have a lot to be proud of. So ACE called you back, True Value did not, at least for two years. And they are basically saying you don’t have what it takes. You are a 31 year old white woman in a Black community and without any experience.

GINA SCHAEFER: In the middle of a city and there were no ACE Hardware stores anywhere near any cities on the East coast.

VERNON OAKES: Oh my god.

GINA SCHAEFER: Yeah it was rare. It was just — I’m not gonna say I was a pioneer. There were plenty of ACE stores in San Francisco and Chicago and there were a couple in New York City, but there weren’t enough, and there were none in Baltimore and there were none in DC. So there was no precedent for opening in Washington and Baltimore, which for me was fantastic. That meant there was no competition, and the communities all over both cities were ready to have a place to buy hardware. But it was a scary proposition for ACE at the time.

VERNON OAKES: Well, if you check the boxes you get no checks, no experience.

GINA SCHAEFER: And no money in the bank.

VERNON OAKES: No money, oh my god.

GINA SCHAEFER: We owned our house. So Mark and I had gotten married by this point. We owned our house and I also owned a condo. The first condo that I bought in Logan Circle, I kept it as a rental property. And so we got an SBA loan for that first — I did — SBA loan for that first project, and they used the house and the condo as collateral. And so that enabled me to get that first loan to open Logan Hardware initially.

VERNON OAKES: Phenomenal, phenomenal, superb. And when you were on the air once before I called you the cheerleader of hardware stores, okay. You don’t look like what I think of a hardware store owner when I go in, which is this old, hardened man, okay.

GINA SCHAEFER: Yeah, you’re being stereotypical there Vernon.

VERNON OAKES: Yes I am totally, totally. That’s what I saw. And his hands were all messed up because he either hit the hand instead of the nail, or you know tried to screw something off, but he had this experience of a contractor or something, and he decided to open up a hardware store, or his parents and family had been in hardware stores for five generations, and so forth. You didn’t have none of that. You weren’t a male.

GINA SCHAEFER: No, I was a hardware orphan.

VERNON OAKES: You weren’t a male. You weren’t a white male. You were young, you weren’t old. I mean, this is what you saw. And then you have no experience in running a business. I just don’t see why they didn’t say no to you, but he tried to do it backwards.

GINA SCHAEFER: Well, I think they were planning on it. Yeah, I mean, I think that’s why that guy lied to me, because I think he knew they were probably going to say no. And I don’t know if he got a commission. I don’t know if he really was as enthusiastic about the project as I like to believe in hindsight, but it just, you know, it was sheer grit, enthusiasm, and a little bit of naivete, I guess.

VERNON OAKES: Okay, sometimes they call it naivete or stupidity, but okay, okay, okay.

GINA SCHAEFER: I like to think I was really naïve. I was not gonna let this neighborhood down. I mean, first of all I had put my house and my condo on the line, right. Second of all I had a husband, a new husband, who was my biggest cheerleader, and was sure that I was going to be a success. And then I wasn’t going to let the neighborhood down. I did not want to work for anyone else again. I was tired of being laid off. I didn’t like the tech industry. I loved the fact that hardware was very tangible. It was really all about customer service, and taking care of my team, taking care of the neighborhood. And I mean I could have been selling clothes, or shoes, or flowers, or hardware. And I just happened to choose hardware.

VERNON OAKES: Phenomenal, phenomenal. So he said to you, go get the lease first.

GINA SCHAEFER: He did.

VERNON OAKES: All right so you’ve got an SBA loan, you put up your house and your condo, you go sign a lease, and you don’t even have the contract with ACE.

GINA SCHAEFER: That’s where the stupidity comes in Vernon, because I should have known. I mean I should have — maybe I should have — should I have known? I don’t know.

VERNON OAKES: Well see if you had known and had the business smarts you wouldn’t have done it, and you wouldn’t have had 13 stories today and be successful.

GINA SCHAEFER: Well yeah, what if they had said no? I mean it kind of makes me sick to my stomach to think if I had done it the proper way, and they had said no to me, we wouldn’t be having this conversation, none of this would have ever happened.

VERNON OAKES: The likelihood is you would have gotten a no because of the check box. You don’t fit the image, you don’t have the experience, you don’t have the money, you don’t have blah, blah, blah, blah, blah, blah, blah.

GINA SCHAEFER: Nothing.

VERNON OAKES: So you go and through you say grit, determination, force, power, I am going to have a hardware store, and I put up everything to get that. I put up my house, my condo, all of the valuables I have gained, plus I signed a lease. Now see signing the lease was like I don’t know if I’d have done that.

GINA SCHAEFER: 1.9 million dollars.

VERNON OAKES: Yeah well all they can take is your house and your condo, and that’s already up.

GINA SCHAEFER: I had some lovely tenants at the time that were living in that condo, and I was having a chat with him early on one day, and I think his name was Nick. He said, well what what’s gonna happen if you fail? And I said they’ll take my house, my car, and my dog. And he goes, they’ll take your dog, you know, dramatic reaction. Well I didn’t want to tell him that they would actually take the condo he was living in. I didn’t want to stress him out. So I threw my dog on the bus.

VERNON OAKES: Okay so hindsight was perhaps from a business standpoint not the best thing to do and from a business standpoint it was the right thing to do. All of the above.

GINA SCHAEFER: Yes, yes.

VERNON OAKES: Okay so when did you get your second hardware store?

GINA SCHAEFER: We opened a second store exactly two years to the day after the first one, and truly it was one, a lesson in trust. We had to be in two places at once and what was that going to mean for us? We had to start building a very strong cultural foundation for the company to expand. And two, people were coming in from all over the city asking us to open in their neighborhood. It was truly the most terrifying and flattering experience of my life.

VERNON OAKES: Okay we’re gonna take our first break, and we’re gonna come back and talk about how do you go from one to two to thirteen, but then what are some of the heartaches that you had as you were going through this, getting to selling it at some point. We’ll be right back. Please don’t touch that dial.

VERNON OAKES: Welcome back everybody. This is Vernon Oakes and the program is Everything Cooperative, and we have Gina Schaefer on the line with her. In the first segment we talked about her starting her first store and the hardships she had to go through. She did not look like a hardware store person. If you look at all of the biases, she didn’t fit anything, young, female, did not have the experience of owning a business let alone a hardware business, but she persisted. Grit is the term she used. And it’s like I am going to open this. I’m going to make sure that I am serving my community. Opened her first store 2003 in Logan Circle where she had bought her first condo. Got married and her husband was her cheerleader, okay. And he was smart. He learned early what it took me a long time to learn. I learned to say

VERNON OAKES: Well I learned to say, yes dear, that’s what I — okay, makes a happy home. So you had your second store. And what are some of the issues, or concerns, or the struggles you had to go through with that first and second store?

GINA SCHAEFER: One of the first lessons was from an old hardware retailer who said that he never opened a second location because he couldn’t be in two places at once. And if you stop and think about that, of course we can’t, I mean it’s humanly impossible. So to make that an excuse for anything doesn’t work or it didn’t work in my brain. There had to be a way to figure out how to overcome that particular excuse. And so for me it really boiled down to trust. And if I was going to be in this part of town, in this part of town, in a physical building and needed somebody there I had to trust them. And if I’d hired somebody that I didn’t trust I’d hired the wrong person. And so we set out in that first location in Logan hardware of one, building a foundation trust and two, really defining what our core values were so that we could take somebody from that location and send them across town to another location, and have them still operating the way we would want them to operate back in Logan Circle.

GINA SCHAEFER: And so, if you think about, you know, some very basic principles, be nice, be a good neighbor, always grow and share. Some of the core values that we use to this day and everything that we do to govern the business, somebody learned those working with us at Logan Circle, and then we sent — it was a cashier actually. Her name was Jennifer Ward and we transferred her, promoted her to manage this new store at Glover Park. She moved to Glover Park so she could really get involved in that community. She went to the community associations in Glover Park because I couldn’t, because I couldn’t go to the ones in Logan Circle and in Glover Park and be all things to all neighborhoods. And so Jen did that, and then Jen helped grow the next leader, and the next leader, and the next leader. Jen in fact was the manager under whom our first Baltimore manager worked. And you know he learned how he operated, and he was a fantastic retailer. And when he said, do you want to open in Baltimore? We said why not and we jumped at the chance.

VERNON OAKES: Okay so that first store in Logan Circle, Jennifer Ward your cashier, okay how many employees did you have and where they where did they come from? Did they come from the neighborhood?

GINA SCHAEFER: Well yeah Logan Circle for sure. I mean it’s a little bit different now, but at the time I mean almost everybody walked to work. They were all neighbors. I think we opened with four employees, which was really an oversight, undersight, a bad thing because it wasn’t enough. When we opened the second location we probably had 12 or 14 employees at that point at Logan Circle at Logan Hardware. And Glover Park actually quickly became a much busier location. The neighborhood was already more established. There were no boarded up houses and so you know every house was occupied. And so it was much it was much quicker of a success than Logan Circle, Logan Hardware.

VERNON OAKES: So in your first store in Logan everybody walked to work, everybody lived in the neighborhood, you went to the association meetings, it was all about neighborhood?

GINA SCHAEFER: Yes, yeah.

VERNON OAKES: Okay, and then Jennifer goes and moves to Glover Park and opens up that store there. And she understands how to operate, she understands the core values. Were any of these values related to the values of cooperation, honesty, openness, social responsibility, and caring for one another?

GINA SCHAEFER: Well caring for one another, for sure. Being a good neighbor and communicating respectfully are two of our core values that I think get to that cooperative principle really well. We did not understand the cooperative world enough at the time to choose our core values based on the cooperative principles. I can see where there’s overlap now, but we didn’t at the time use the principles of co-ops to create our core values. So we had some happy accidents.

VERNON OAKES: Happy accidents or if you really get to the core values, and I did a show once on the spirituality of cooperation. It’s really out of most spiritual or religious trainings is how we treat each other. You know we talk about building trust, and respect, and treating people the way you want to be treated, and all of those kind of things in the golden rule. And that’s one of the reasons I like co-ops is because that’s it and that’s probably why you’re so successful, or have been, is on those core values and you get people that live the core values.

GINA SCHAEFER: Can I can I tell you a quick story that relates to that, that I think is really a beautiful story?

VERNON OAKES: Yes.

GINA SCHAEFER: So, you mentioned checking the boxes earlier. We took the felony box off of our application when we opened that first store. It was still legal in the district, and a lot of states have now banned the box so you can’t ask, and we banned it from the beginning, the felony box.

VERNON OAKES: That means that you can hire somebody with a felony?

GINA SCHAEFER: Correct. You can hire somebody with a felony, but it was legal to put on your application the requirement that someone announce that they were a felon, make sense? Okay so we banned that box long before it was a legal requirement. And our first or second employee was a returning citizen named Tommy, and I loved Tommy. He worked with us for 11 years. Our second or third or fourth employee was a 14 year old who was growing up in public housing, almost a teenage mother. I’ve always believed that business is people, product, and place. And I think for those two employees in particular, in charting the foundation for our core values, I watched them find their place.

GINA SCHAEFER: I watched Tommy realize that he could have a wonderful life outside of prison. I watched the 14 year old realize that he could grow and mature outside of the housing project that he was growing up in. And so we were kind of the third P in that in that stool. And so those became part of the guiding principles because I wanted everyone to find that place. And it was as simple as that. I mean for me, my place was Logan Circle. I found this neighborhood that I loved and supported and wanted to be useful to, and then you know our first employees were starting to find their place too.

VERNON OAKES: So they found their place at the store. How could you even hire a 14 year old though?

GINA SCHAEFER: Well okay, so I did not realize when he came to interview that he was 14. He came with a mentor from a nonprofit organization that he was a part of. And I don’t remember the gentleman’s name but he did all the talking. So I would ask Eddie — Eddie was the young man — I would ask him a question and the gentleman with him would do all the answering. And I was too — all right we’ll keep using the word stupid Vernon — I was too stupid to know that I had to go ask somebody whether or not I was allowed to hire a 14 year old.

GINA SCHAEFER: And they said with his mother’s permission he could come work, you know, so many hours a week. And so Eddie worked for us for 10 years. He worked for us part time until he graduated from high school and then full time, you know, when he got old enough that he could work during the summers full time. I didn’t know. He was great, we loved him. He was like the kid on staff and everybody took care of him like he was, you know, their little brother. Yeah it’s fun to think about.

VERNON OAKES: Well see it’s almost like naivete and you’re following your heart. So it’s like, yeah, he makes all the sense in the world. Yeah and if you had now 20 something years of experience you may say, no we probably shouldn’t hire somebody that young. But back then, hey. Any other trace of those first employees?

GINA SCHAEFER: Well yeah so we started hiring folks from the Whitman-Walker addiction services program, which is right — it’s across the street from our store now, but it was down the street then. And a gentleman named Shane walked in one day. And he said, I’m attending meetings in the addiction services program at Whitman-Walker, would you give me a job? And I said no, not because of where he’s from, but because I didn’t need any employees. I didn’t have any staff dollars. And so I said no, and he came back — we’re such good friends now — and he came back every day, will you give me a job? I’m sorry. He showed up one day and we had to unload a truck and we were desperate, and I said will you please help unload this truck? And then he started coming every week and unloading the truck and that’s sort of the lore that we eventually hired him.

GINA SCHAEFER: And he came to work for us and when he left he started telling everybody else at Whitman-Walker to come find the lady at the hardware store. So other folks from his program started showing up asking for a job, which was really meaningful in ways that I had no idea at the time, you know, how that would play out further down the road.

VERNON OAKES: Can you give us one hint before we take our next break, the meaning of it?

GINA SCHAEFER: Well I mean I’m writing a book that’s totally based on — or did write a book — publishing a book based on that experience, and what I’ve truly learned from hiring folks who are dealing with the disease of addiction. So, they’ve become a very special part of our life.

VERNON OAKES: So, you went from IT to hardware store owner, naïve, been in it for 22 or so years. You’re beginning selling your businesses and now you’re writing a book, becoming a publisher.

GINA SCHAEFER: Yes.

VERNON OAKES: Okay we’re going to take our second break, because I really wanted to come back and talk about this book, and what you’re doing, but before we do that let’s take the next segment to talk about how you went from 2 to 13, and what were the benefits of being an ACE, being inside of a co-op, a purchasing co-op, and the kinds of things that you’re learning. I really do want to get to — what’s the book called?

GINA SCHAEFER: Recovery Hardware.

VERNON OAKES: Recovery Hardware.

GINA SCHAEFER: Recovery Hardware.

VERNON OAKES: Okay from Whitman-Walker Center. We’ll be right back, everybody. Please don’t touch that dial.

VERNON OAKES: Good morning everybody. This is Vernon Oakes and the program is Everything Cooperative. We have Gina Schaefer on with us this morning. She is the — and with her husband Mark — the owner of 13 ACE Hardware stores. She started her first store at Logan Circle in 2003, being about a 31 year old female with none of the characteristics, or the normal biases of a hardware store owner, which was normally a white, male older, didn’t fit those boxes at all. And she ended up going from one store that if you just look at it from a financial, I mean from a business standpoint should have never opened, and to 13 stores. So, Gina what are some of the lessons? You were talking about that, but you hired all of these different people, Tommy, Eddie, Shane, returning citizen, young 14 year old Shane, addict at Whitman Walker clinic. You took all of these risks, what did you learn?

GINA SCHAEFER: Yeah I love that you just used the air quotes, and I love that you’ve referenced the biases so many times, because it’s true that I think unless we really talk about some of these stereotypes that we have as human beings they don’t get resolved. I don’t know what word to use, but you know we will continue to think that we shouldn’t hire a returning citizen, or we shouldn’t hire someone early in his is addiction recovery programs. And I think one of the things that we’ve done in the last 20 years is really shatter those biases. And not necessarily on purpose. I mean it happened organically.

GINA SCHAEFER: I didn’t set out to write a book called Recovery Hardware. I mean that name was given to us by the community, and it just became this beautiful thing that we recognized. But we made so many funny mistakes — just to take it from that sort of serious context to funny — ACE Hardware is an amazing cooperative. They are a fantastic cooperative purchasing cooperative partner. And they have really great training programs and mentoring programs and a whole host of [indistinct] for now they didn’t necessarily have back then. So there was a lot of trial and error for Mark and I. And we’ll look back at some of the funny mistakes that we made.

GINA SCHAEFER: And I will not bore you with all the details, and we joke about them now, but I mean such rookie moves about how we dealt with money, for example, or you know things that we had to do to be licensed with the district government that we just didn’t know about. So you know now growing up in ACE and their programs getting so much stronger a lot of that might have been avoided. But now they’re just sort of funny quirks from my past, little road bumps.

VERNON OAKES: Yes, having run a business 27 years in DC I understand. And you had a mother that was an entrepreneur. I didn’t have — my father was on the railroad, my mother taught school. So I didn’t have an entrepreneur kind of bug. It grew on me. But these stereotypes, these biases, you said they were happenstance and you were able to shatter some of them. Can you give me any examples of that?

GINA SCHAEFER: Well you know just I mentioned that we banned the felony box. But I think that the biggest thing that we did was we created a place where anybody of any background could come together and the community — it wasn’t any of the community’s business to know, for example, that Tommy was a returning citizen — but they interacted with folks like Tommy every single day, and loved him, and respected him. And it was it was a way for us to bring folks of a variety of backgrounds together in a community setting, and all of those stereotypes went away. And maybe it was because you know not everybody knew everyone’s past, but we created the place. And again a lot of this was just on accident. I mean we were just — it wasn’t on accident. We were very nice and trusting right. So I have to give us some credit for being willing to do that, but we created this place where everyone was safe to become who they really were.

VERNON OAKES: Okay, all right, I love it. How did you go from your second to your third to your 13th store?

GINA SCHAEFER: So we opened that second store in March of 2005, and then we proceeded to open one store a year for the next 10 years. We were fast and furious. We got that second loan from National Cooperative Bank. They have been — and this is not a plug or a commercial but I love NCB. They started giving us money to open our subsequent stores, and we just kept finding places to open. We opened 10 stores from scratch. We purchased four. One was a True Value that we converted to ACE, and then the other three were already existing ACE stores. We went up the train line to Baltimore, opened three in Baltimore, bought a store in Old Town Alexandria bought a store in Silver Spring.

GINA SCHAEFER: We closed a store that didn’t work. Our fifth location never worked and so we closed that down in 2017. That was really tough. It was hard for us to do that. It was hard for me to do that. But it never it never pulled its own weight. We tried everything. So that’s how we went from one to thirteen in a nutshell.

VERNON OAKES: So, I don’t mind you doing a plug for NCB, and if we could have planned it I would have asked you to do the plug, because I missed doing the plug right at the end of this session. I normally talk about their mission. Okay and they’re there to support co-ops and their members. ACE Hardware is a co-op. You are a co-op belonging to a purchasing co-op. So it’s there to help ACE and its members. You are a member of ACE so that makes sense. And working in low-income communities — some of the communities that you’ve been in are low-income communities — by providing innovative financial services. So you’ve just given them the plug that I would normally have given them, so yeah.

GINA SCHAEFER: They were so helpful. You know historically — and you know this Vernon — historically the small business administration has not funded cooperatives. They don’t know how to fund the co-op. And so there are some workarounds now, but it’s very challenging. And the fact that there is a national bank that understands how cooperatives work and they’re willing to fund people like me who want to own and be a member of a cooperative was really valuable. 2004 I did not want to go the SBA route again. I wanted a bank that understood what we were doing, that didn’t have you know seven miles of paperwork to fill out, and NCB was very just very wonderful and supportive and they have been ever since.

VERNON OAKES: So why — let me just say this — Roberta MacDonald from Cabot Creamery said that Chuck and the folks at NCB are angels. Okay and that’s how she said it. Unfortunately Chuck passed November, as you know. And he made it — and I know at some point you got to meet him. Did you meet him right away or did you go through–

GINA SCHAEFER: Chuck?

VERNON OAKES: Yes.

GINA SCHAEFER: Yeah I mean the fortunate thing for Mark and I is that because we’re in Washington we’re close to the headquarters. And so every time NCB had an annual meeting we were invited. And so we got to know Chuck very early on, and the rest of the staff at NCB. So they’ve been great. And I’m just going to tell you that Roberta MacDonald is an angel. I mean that woman has changed my life in more ways than she will ever let anybody admit. Amazing, she’s just amazing.

VERNON OAKES: She has high things to say about you too. But just six months ago or so, not that long ago she invited me to a luncheon with eight people. And we had our own separate room so we could do the COVID stuff, because that was the first thing I did outside of, you know, with COVID. And it was phenomenal, the people that I met. I knew maybe four, Paul Hazen, and Anthony Cook from Georgetown, or Roberta and myself. I think that was it for people I knew and the rest of the people I just got to meet just phenomenal people. And she was just coming through town and pulled together lunch.

GINA SCHAEFER: Mark calls me a hurricane. She is definitely a hurricane, I mean she just whips everyone up around, like, brings us all together in the most delicious ways.

VERNON OAKES: So knowing people like Roberta and Chuck Snyder, NCB helped you and Mark to grow by getting that money, but do you know that’s why it’s so hard for SBA and other banks and so forth to make loans to co-ops?

GINA SCHAEFER: Yeah so it’s not exactly the same thing for a purchasing co-op, but grocery co-ops for example don’t have one owner. And a bank wants there to be one owner that they can pin the liability on. And so if you bring together a cooperative group of people with collective ownership the bank can’t pin the responsibility on one person. And they, like I said, there are some workarounds now that they figured out, but that was historically a challenge. And so you know NCB was formed in the 70s so that there would be a funding mechanism for cooperatives, cooperative housing, cooperative farming, cooperative grocery stores. Purchasing co-ops are a little bit different. For example Mark and I are the sole owners — were, we’ll talk about our ESOP soon I think — but we were the sole owners of this hardware business and so we had the liability. The bank could pin it on us if the business failed. But that’s the reason historically the SBA and traditional banks did not like to fund cooperatives.

VERNON OAKES: So there’s a second that I’ve learned, because I thought I was going to be a banker when I was in the MBA program, so I took a lot of classes. And banks are interested in three things. They’re interested in getting their money back, the first thing. The second thing is they’re interested in getting their money back. And the third thing they’re interested in getting their money back. And that’s the money they loan out plus interest. So they wanted to know who will sign the loan, that’s the first thing, and then the second part is do they have collateral? So if that business went under then they can go get your house, and your condo. You had to have that collateral.

VERNON OAKES: And too often in Black, brown, and Indigenous people’s communities that collateral is not there. There may be the one person that can sign but they don’t have that collateral because of all kinds of racism, and slavery, and Tulsa, and da, da, da, da, da. So, just real quick before COVID white families had on average 171,000 dollars of net worth — how much they owned over what they owed — 171 000. Where Black families owned 17,000 dollars more than what they owed. So it’s 10 times more wealth, the average white family over the Black family. So trying to get a loan from SBA or a bank or a normal place just won’t happen, because you don’t have that collateral. And then for a co-op, if you have a worker co-op with five people, there’s not one person that will sign. And maybe you have to get all five, and maybe all five of them in a low-income community may not have the collateral.

GINA SCHAEFER: They wouldn’t qualify. Yeah you can see it’s a slippery slope that creates a whole host of issues down the road.

VERNON OAKES: So that’s what National Co-op Bank has come in to be so helpful. And they’ve been our supporter for nine years, financial, and they have cheerled us on for those nine years, teaching us about the whole co-op world. And their 100 largest co-ops and everything that they’ve done, it’s just been phenomenal. So my experience with them is the same as you and Roberta, they’re angels. Okay so you were able to get loans from there. ACE Hardware is fine because you’re doing a great job. You don’t have to buy everything from ACE, but is there a percentage that you have to buy from ACE when you sign up for them?

GINA SCHAEFER: Yeah the percentage is really low actually. I have always been a big advocate for supporting the cooperative with our purchasing dollars in the biggest way possible. They streamline the process. They find us the best prices. They warehouse what we need. But gosh Vernon, my math skills are terrible. It’s a very small percentage, let’s just leave it at that. It could be bigger. I think that the support that we provide our co-op could be, the requirement could be bigger. But those of us who really believe in it and want to make sure that the co-op survives and does well buys the most that we can from them. And truly my chain probably buys I would say 90 percent from ACE, 90 percent or more. And the only reason it’s that low is because ACE doesn’t do anything with plants, live goods, and I have to sell a lot of house plants and a lot of nursery products. And so a big chunk of what we have to buy outside of the ACE network is just greenery.

VERNON OAKES: Is what they don’t provide,

GINA SCHAEFER: Correct, correct. Yeah, not that we wouldn’t want to support them they just don’t have those items.

VERNON OAKES: So, I don’t know what low is but let me make up a number. So, if your contract says you have to buy 20 percent from ACE, whatever that low number is, 10, 20, 30 percent, you buy 90 percent. Your group of 13 stores have on average bought the most you can buy from them, because that supports the store. Now do you get a dividend check from the store?

GINA SCHAEFER: We do. So we get a dividend every year based on the percentage of our purchases. So again, the more we buy from ACE, the bigger the dividend. It comes back to us in the form of–

VERNON OAKES: We got to go to our next break. We were having so much fun. I didn’t even hear him tell me, okay, but we’re going to our next break. So, I want to get back and talk about ESOPs next. You’re selling it, why you decided to sell to your employees, and then why ESOPs or why not co-ops. And we’ve got to spend some more time talking about Recovery Hardware, your book. We’ll be right back. Hopefully we have enough time.

VERNON OAKES: Welcome back. This is Vernon Oakes and the program is Everything Cooperative and WOL is a great partner because information is power. And Gina Schaefer today is giving us information about purchasing co-ops and starting a business and her successes with her husband of having 13 stores. But it isn’t the information, it’s when you use the information where you get the power. So we’re hoping you’ll take the information that you can learn here from Gina today to either start your own co-op, go find a co-op to work, in but build that wealth, knowledge and wealth. Gina you decided to sell, you and Mark decided to sell, why did you do that?

GINA SCHAEFER: You know almost from the beginning people asked us what our exit strategy was. I don’t have children. It’s a very generational business so passing it on to my kids wasn’t going to be an option. So we wanted to make sure that before we got any older we had an exit strategy. And so we started doing some research and we researched selling to another a store, selling to a private equity company, forming a worker-owned co-op, and forming an ESOP, which is an employee stock ownership program, in which 100 of the business ownership could be transferred to a trust on behalf of the employees. There is no way I was selling to a private equity. I thought especially after the last two years with civil unrest and all of the inequalities that we are you know finally starting to talk about in this country we wanted to do something that was part of the solution. And to Mark and I being part of the solution was having our team actually own the business. And so we ultimately chose to form an ESOP.

VERNON OAKES: Why an ESOP?

GINA SCHAEFER: Which is almost a year old. I think it was July of last year — yeah almost a year.

VERNON OAKES: Okay so you’ve already formed the ESOP, and the employees — how many employees?

GINA SCHAEFER: So we have, this time of year we hire seasonally, so we have about 300 teammates, about 170 of them are co-owners now. And we have sold 30 percent of the business to them. So just real briefly the business has to pay Mark and I for, you know, the ownership. So, they have to buy the ownership from us just like a private equity company would. And so we have sold 30 percent to start with so that the transition is more financially manageable for the business and a little bit slower.

VERNON OAKES: Okay and how long — it’s a year — how long before they’re 100 percent owners? They’re 30 percent now.

GINA SCHAEFER: Yeah I mean it could take 10 years, to be honest. It depends on, you know, one of the things — and this is a topic for a whole other conversation –it depends on how vibrant the shop local community remains. I mean the more and more purchases that go to big box stores or big online retailers the less likely people are to shop at small stores, the less likely we are to be able to sell more of the business to our team. So that’s again a whole other conversation, but as long as our business remains strong and vibrant I would say anywhere from five to ten years before we can officially sell 100 percent of it.

VERNON OAKES: So if those employees want to own more then they’ll want to do whatever they need to do to sell more products so it’s more profitable?

GINA SCHAEFER: Yeah, yeah essentially I mean we all are responsible for increasing the profitability. We were all that way before, we always had a profit sharing, but this is legitimately you, Vernon Oakes are a member of our ESOP and the more you do to make the business make money the more ultimately comes back to your bucket of it.

VERNON OAKES: So you’re increasing your wealth, how much you own over what you owe by making sure this business is profitable and more profitable it is. But it does the same thing for the community. If Logan Circle community says we want to have ACE Hardware here, and we want these employees to own it then they just make sure they shop more there than going to the big box stores. We won’t even name them today, okay. Okay, what’s next? So they own 30 percent right now. They’ll go to 100 over five to ten years based on how profitable they are. Why not a co-op? Why not a worker co-op?

GINA SCHAEFER: I’m not gonna lie we didn’t do a ton of research into forming a worker owned co-op, but one of the things that had been explained to us at some point is that it’s easier to form and manage a worker-owned co-op when you have fewer employees. We liked the idea of the ESOP model because it took the stress of the management away from everybody, but gave them the benefit of the ownership piece. And we could argue you know in both directions, but we thought based on the number of employees we had and the size of the revenue — it’s actually more expensive I think to form an ESOP than a co-op, so we went a more expensive route in the long run, but we liked the idea of the ownership model without the hassle of the management piece.

VERNON OAKES: Okay, management, number of employees, the cost of forming the ESOP versus the co-op, those are some of the variables and looking at this. And I really want to get somebody else on to talk about that, what makes the difference, but you’re — may I ask you how old you are now?

GINA SCHAEFER: How old I am?

VERNON OAKES: Yeah.

GINA SCHAEFER: 51.

VERNON OAKES: You’re 51, okay. I was hoping you wouldn’t smack me, being a woman. It’s another bias, okay, okay all right. But at 51 there are some numbers that say that I don’t know 70 percent of small businesses are owned by baby boomers like me in the 70s, 75, 80s, and they too often don’t have the exit plan, they don’t have the children either that want to be in the business. And so, too often they just close up. And the community loses that business, and those employees lose that. So you’re converting it to an ESOP is much better than closing it up and I think better than selling it to the venture capitalists or whomever might, and maybe even better than another ACE Hardware store, because those people live in the communities, they stay there, and you build up community. So that’s phenomenal. That’s phenomenal. How do you and Mark feel about all of this process?

GINA SCHAEFER: Well Mark has to deal with all the banking issues, and so he might be a little more stressed about the numbers and details than I am, but I’m really proud of us for doing this. I think it’s a fantastic way to help a small business, or 13 small businesses last in the community. I think it’s a great way to create generational wealth for employees. It works a lot like a 401k program and it’s a slow wealth growing process. It’s not, I’m going to be rich tomorrow, at least not in the hardware world. I mean there are co-ops or ESOPS that have sold and the employees have made you know lots and lots of money. That’s not going to happen in our case, but I want my cashiers to very proudly say, I own this business. And so I’ve been proud that we’ve created that opportunity. I I didn’t want to be in the hardware world forever, as much as I love it. I have a million other things that I want to be able to do. And so this was the first step in making sure that I could start doing some other exciting things.

VERNON OAKES: Okay and the book. So that leads right into the book, the next exciting thing. So what’s your book called again?

GINA SCHAEFER: Recovery Hardware.

VERNON OAKES: Recovery Hardware, from a few good hardware stores to Recovery Hardware. What is it about? And when can I get one? When can I buy one?

GINA SCHAEFER: When can you get one, okay that’s the best question. So September is national recovery month so the book is going to officially launch in September. It will be available for pre-sale in August but because it ties in so nicely to that national awareness month in September that’s when it will officially launch. I think the beauty of the book, and then ultimately the fact that we created the ESOP, is that if you think about the fact that Logan Circle was recovering in so many ways when we opened that first location — and I give us no credit for that recovery.

GINA SCHAEFER: We were just here to sell the hammers and nails that people needed to fix their houses — to us being by the Whitman-Walker addiction services clinic, to us creating this fantastic hiring practice, to Logan Circle getting better, and us expanding to other neighborhoods, I think the word recovery is all-encompassing in this case. It’s given me a chance to talk about the leadership lessons I’ve learned, people along the way who have inspired me like Roberta, and like father Gregory Boyle in California and the Zingerman Delicatessen in Ann Arbor, Michigan, I mean so many people that have helped me on this crazy hardware journey, because I started with zero knowledge. So the book is a celebration of that and, what I’ve learned. And a great deal of it is what I’ve learned from my teammates, who are in active recovery from some type of addiction.

VERNON OAKES: So can you give us any of that, what you’ve learned from your teammates that were in recovery, anyone?

VERNON OAKES: Yeah so, you know Shane was our first employee from the program. He now owns a fantastic restaurant in Washington DC called Crazy Aunt Helen’s.

VERNON OAKES: Crazy Aunt Helen’s?

GINA SCHAEFER: Crazy Aunt Helen’s yeah. It’s wonderful. It’s American comfort food. Think fried green tomatoes, and chicken and waffles, and it’s just the space is amazing. But you know he said to me, which is a fairly common phrase, don’t give up five minutes before the miracle. And so it always makes me pause every time there’s a challenge or every time somebody is you know just perhaps not acting the way they should, and I will always pause and say, is there a miracle five minutes away? And I’ll hear Shane’s voice and I’ll say, maybe I should just you know take a beat. And so that’s just one. There 14 chapters in the book, and there’s so many great things that I learned that are highlighted chapters that I hope resonate with people in a really meaningful way.

VERNON OAKES: So we’ve got to have you back on in September or August to talk about — I just want to talk about the book and some of the things that you’ve learned from it, some of the things I can learn from you, because addiction is big in my family. It’s one of the diseases with diabetes and hypertension. So talking recovery is huge for me and it has been the 75 years on this earth. In the last minute, what message would you like to leave people with?

GINA SCHAEFER: Well I think that I would just like to say that you know if you’re listening and you want to start a business, don’t be afraid. Find a co-op that will support you on that journey. I was lucky enough to find ACE Hardware in 2002, and they became a fantastic partner, and I’ve been able to grow in communities that support us. And I’m just so grateful for it. It’s been a wonderful experience. It still is a wonderful experience. I’m not done.

VERNON OAKES: Okay, thank you, thank you so very much. Thank you everybody out there for listening to us today. We’ll be back next Thursday. Please live cooperatively. And Gina, thank you for taking the time to come out and talk to us.

GINA SCHAEFER: Thank you, Vernon.

VERNON OAKES: All right.