Carolyn’s
‘I’ve never seen anything this bad’
“This is just very, very hard,” says Carolyn Garfinkle about the recent demise of Carolyn’s Interior Accents, the Cabin John Mall gift shop she owned for 18 years. “I should have gotten into the Internet. I know that now,” says the Richmond native, who has lived and worked in the Bethesda area for more than 40 years.
It was the economic downturn, however, not the lack of a Web presence that ultimately forced Garfinkle, 78, to close her store in February. “In all the years I have been doing this, I’ve never seen anything this bad,” she says. “People just don’t have the money to spend, and gifts are the first thing to go.”
About a year ago, Garfinkle began noticing a drop in her retail business. She already was operating with just a couple of employees, so reducing staff was not an option. “We started to have more frequent sales, but you can only cut the prices so much,” she says. Renegotiating her rent would not have saved enough to put Carolyn’s in the black, either, so Garfinkle didn’t bother to ask her landlord for a break. She needed to sell more, but her monthly sales were on a steady slide. Then, in September, the stock market took a downturn of historic proportions. “By October, I knew we had to close,” Garfinkle says.
She called the sale leading up to her store closing a “retirement sale.” But the widow and mother of three grown children wasn’t really ready to stop working. Even as she greeted loyal customers with a smile— face made up, hair perfectly coiffed—she was networking for a new job. “I’ve been standing on my feet for 20 years, so it would be nice to sit down at my next job—as long as I’m with people, because I’m just an easygoing people person,” she says.
Redwood
Timing is everything
Bigger did seem better when Jared Rager and his partner, Eli Hengst, agreed to open the $3.5 million, 300-seat Redwood restaurant in Bethesda Row. “We signed the lease in late June of 2006 and those were the glory days, when money abounded and restaurants were doing well and thriving,” recounts Rager.
Redwood, which was eagerly anticipated by foodies when it opened last July, was quickly hit by the one-two punch of a faltering economy and less than glowing reviews. Against this backdrop, executive chef Andrew Kitko departed in December.
Business hasn’t been what the owners had hoped. “Our projections showed three scenarios: base case, upside case and downside case,” Rager explains. “All three represented levels of sales that would allow Redwood to operate at [a] profit; we are currently at our downside case.”
Redwood is covering its expenses, Rager says, “but we certainly wouldn’t want to see things get any worse. We can continue to operate at this level, but it will impact both the income we’d hoped to take home and our ability to pay down our debt more aggressively.”
Rager says Redwood is experiencing the economic downturn in two ways: Fewer people are dining out, and the ones who are dining out are spending less. “What we were seeing [is] a change in what people are spending,” he says. “People aren’t buying as expensive a wine…Our check average is creeping down.”
In response, Redwood has adjusted its menu and dropped the prices on some items. The $46 smoked beef ribs are off the menu, and entrées now start at $15. In addition, Redwood has begun offering prix-fixe business lunches and earlybird dinners.
Rager knows that surviving the downturn will be a battle, but he is optimistic. “We do expect business to pick up when the weather improves, [and] we are able to open Redwood’s wall of windows and add around 100 outdoor seats,” he says.
Brad Rozansky
‘I’m running a business’
While many real estate offices are empty, Realtor Brad Rozansky’s office on East West Highway in Bethesda is bustling. One reason his iPhone keeps buzzing: foreclosures. “It’s not that I jumped on the bandwagon this year; this is something I’ve been doing as a tertiary business for almost 20 years,” Rozansky says.
Unlike many agents, Rozansky has a diversified practice. As a Long & Foster agent, he says he has brokered more than $1 billion in residential sales and has shepherded through a variety of commercial real estate transactions, in addition to handling foreclosures. “I’m running a business, unlike most real estate agents, who are just running,” he says. Rozansky predicts that at least one-third of Bethesda-area real estate agents will leave the profession during the recession.
Rozansky, 54, started selling real estate in 1980. He formed his own company and sold it to Long & Foster in 1992. When the market was booming several years ago, Rozansky was one of the area’s top agents (as he still is today). The foreclosure business was minimal then, he says, but he used that time to develop relationships with area banks. Today, many of those same banks use him to sell foreclosed homes they own.
Rozansky estimates that 20 percent of his sales these days are foreclosure related and that 90 percent of those foreclosed homes are bank owned—eliminating the emotional trauma of dealing with people who are losing their homes. He says he tries to show the remaining 10 percent of foreclosed homeowners the utmost respect. “If their home is in foreclosure, they’re a client like any other, and we answer their questions and keep them informed on our progress, just like we would any other client.” Rozansky says that he has even advanced people the money to move out of foreclosed homes.
“The first wave of foreclosures was the subprime mess, and now we’re going into the next mess, which is the economy,” Rozansky says. “So the people who now face foreclosure will be additional victims because they’ve lost their jobs or their income got cut.”
Rozansky says that in a recession, basic business practices are necessary for survival. While other agents may shave costs by reducing their advertising, Rozansky maintains or even increases his newspaper, magazine and direct-marketing efforts. “There are some people who got into this profession because it was quick money, and the business came after you,” he says. “Now that times are tougher, you have to have the money to invest in your listings with marketing people and advertising.”
Level Fitness
Stress reducer
“We still have a waiting list to join,” says Jay Kaufman, co-owner of Level Fitness, a high-end gym on MacArthur Boulevard in Cabin John. Level opened three years ago, and, according to Kaufman, became profitable after a little more than a year. A gym membership with fees of $100 a month might be expected to be the first thing to go in a household looking to cut monthly costs, but Kaufman says that hasn’t been the case at Level. “People feel it’s important for their health and to deal with the stress that the economy has brought on to come in and work out,” he says. Kaufman hired a new trainer in December, and recently added a spin studio.
Kaufman, who owns the business with friend Howard Kandel and brother-in-law David Plotnek, says the profit distribution was up a little in December 2008 compared with December 2007. “I could have made the distribution bigger, but held back a bit because I’m conservative and see the economy around us,” he says. “Believe me, I’ve been happily surprised at how well things have gone.”
Kaufman and his partners have other business interests. Kaufman, for example, owns several hotels as well as Zoe Salon and Spa in Gaithersburg. If the three investors had to live on the profits from Level, “We’d have to move to Gaithersburg,” says Kaufman—a Bethesda native and resident.
Says Kandel: “No one’s getting rich from it, but we are profitable because we had the approach that from the beginning we wanted to do something cool, fun and different, and we didn’t have to pay our mortgages with this.”
Tom Berlin
Service sells
Tom Berlin, owner of Wrench masters auto repair in Rockville, says he was the black sheep of his New Jersey family. While his surgeon father inspired two of his siblings to become physicians, Berlin wanted to work with his hands in a different way.
Berlin came to the Washington area as a French major at The George Washington University, but he found that he couldn’t sit in class all day. He started working part time at a motorcycle shop in Virginia and eventually opened his own auto-repair business. “In the end, I work with my hands in a way like my father did,” Berlin says between answering a phone that rings nonstop and signing off on a car-part delivery. Berlin started his two-man shop 20 years ago and with his wife, Debbie, raised two sons who graduated from Walt Whitman High School in Bethesda.
In an economy riddled with automobile- related business failures, Wrench masters is holding its own. Berlin credits his customer service and reasonable prices. “You have to know your niche and offer people something they need,” he says. “I repair my customer’s cars like I would repair my own—if there is a vital need to fix something, then the work is completed, and, if something else can wait a bit, then we wait.”
Half of Berlin’s business is Volvos, and he thinks their owners tend to be conservative. “Volvos are not the flashiest cars in the world, and, increasingly, I’ve heard from some of their owners that they’re not going to buy a new car…Instead, they say, ‘I’m going to want to keep this one on the road,’ ” he says.
Berlin says he has faced increased shipping costs, gas surcharges on parts deliveries and even requests from customers for more time to pay for repairs because of job loss or health care costs. He says he has occasionally allowed customers a week’s grace period on a bill. “I’m probably a nicer guy than I probably should be from a business standpoint,” Berlin concedes.
Sandy Spring Builders
Making adjustments
During the height of the residential building boom in 2005-2006, Sandy Spring Builders (SSB) was flying high. The Bethesda company was building as many as 10 custom homes a year, mostly on the sites of teardowns, in some of the Bethesda area’s most-sought-after neighborhoods. The houses were big—averaging about 6,000 square feet—and the prices were steep, often well over $2 million.
Today, SSB is still busy—especially by the standards of many other builders. “We usually build eight to 10 homes a year, and now we are closer to the eight number,” says co-owner Richard Mandell, 61. But SSB hasn’t been immune to the downturn in the market and has changed accordingly.
“People are still building large custom homes, especially in neighborhoods like Edgemoor and Kenwood,” says co-owner Mimi Kress. “What has changed is that they expect a deal. People know and expect that subcontractors want and need the work. They are expecting that our profits will go down.”
In response, SSB has reduced prices, and it bids on more jobs than it did several years ago. “Last spring, clients weren’t pushing as much,” says Kress, 50. “Now it’s a different game field. You’ve got to provide the same quality but give better pricing.”
Kress says that as recently as a year ago, most customers came directly to SSB without talking with other builders. These days, many potential customers “bid with another couple of builders…rather than handing it to you,” she says. In addition, many customers are slower to commit to jobs and want to build smaller homes than they did a few years ago. “Some even midstream have decided to cut back,” Kress says.
In response to the changing market, SSB has launched a division to build high-end modular homes. “The quality is so high, the details are so refined and we can do this faster and to the level of excellence that Sandy Spring is known for…at amore affordable price,” Kress says as she sits in the family room of the Roosevelt model, a 5,500-square-foot modular home SSB completed in North Bethesda last year. The asking price: $1.85 million.
“Modular construction allows our homes to be completely constructed in a matter of months—three times faster than on-site construction—and that is a time frame homeowners in this area appreciate,” says SSB co-owner Phil Leibovitz. SSB’s owners hope that the lower-priced modular homes (they are currently building two for clients) and large-scale renovations (now between one-third and one-half of the company’s business) will help them ride out the recession. Kress says SSB did lay off two employees last fall but has been able to maintain its staff of 18 since. Adds co-owner Mandell: “We are trying to keep the team together and keep the doors open, so the change for us is lowering the [profit] margin. We don’t want to stand on ceremony. We will do what we have to, even if it means less [profit] for us, as long as it does not compromise the quality we’ve become known for.”
Sloans & Kenyon
Keeping things lean
Stephanie Kenyon, owner of Sloans & Kenyon Auctioneers and Appraisers in Chevy Chase, understands how to get items sold, even when economic times are tough. She bought Sloans Auction House when it was in bankruptcy six years ago to form her own company, and she has made her business profitable. Kenyon, 54, says her frugal management style has helped Sloans & Kenyon survive the recession. Her offices are not fancy, and clients are not served tea.
Kenyon says she has cut costs by reducing advertising: The company now takes out half-page ads, not full-page ones, and “instead of putting out a three-fold brochure, we opted to go with a less expensive single fold,” she says. When an employee left to work on an excavation site in Peru, Kenyon didn’t hire a replacement.
A Bethesda native and Holton Arms graduate, Kenyon has the refined manner that personifies the elegant escritoires and crystal candelabras found at her Wisconsin Avenue auction house and consignment shop. She started collecting Coca Cola memorabilia as a kid and even brought home a jukebox. College internships at the Smithsonian Institution and Winterthur Museum in Delaware made Kenyon realize that she could have a profession that reflected her love of history.
Kenyon says her company has so far avoided the financial trouble of its larger brethren, such as Sothebys, by selling items that are in the “affordable range. We have seen our profits from the auction slide down slightly compared to last year but that would be because the final sale prices are a bit lower,” she says. “We still have great volume, and there’s always a market for items of lasting value.”
The bear economy actually has had an upside for Sloans & Kenyon, too: It has inspired customers to bring in valuables to sell on consignment. The result? Kenyon’s consignment business is up 30 percent since 2007.
Susan Garraty is a journalist who lives in Bethesda with her husband and three children.
