Essential Tools for Neighborhood Revitalization

• Building a Business in Non-traditional Ways with Gina Schaefer
• Building Communities & Instilling Culture on the Chief Influencer
• Employee Stock Ownership Plan (ESOP): What It Is, How It Works, Advantages
• The ESOP Association
• Recovery Hardware: A Nuts and Bolts Story About Building a Business, Restoring a Community, and Renovating Lives by Gina Schaefer
• Small Giants: Companies That Choose to Be Great Instead of Big by Bo Burlingham

Gina Schaefer:
Often times, I’ll ask my audiences to close their eyes and think about a Main Street that they love, where they feel happy, content. Nobody closes their eyes and thinks about a strip mall in the suburbs. They think about a favorite vacation spot, a beach town, a small town. That, to me, is the kind of community that I want to live in and help build, even though we’re mostly in urban areas.

Reggie Rucker:
Hello, and welcome back to another episode of Building Local Power, the special DC hometown edition of sorts in the city series we’re doing. Exploring how to build local power from the experiences of people who are doing or have done just that on the ground in their respective cities.

I say it’s a special hometown edition of sorts because, in the last episode, we got to share interviews with two of ILSR’s founders about how DC shaped the organizations, foundations. Now this week, we have ILSR Board Chair, Gina Schaefer, on with us to talk about about how she went from a career in tech to launching hardware stores in DC that meant so much to the neighborhood she opened in. It’s truly a special story and Gina is a remarkable woman.

Luke Gannon:
Thank you so much, Reggie. That is so kind of you to say. I am truly so lucky to be surrounded by special and remarkable people, including you, and also including a loved one, a father figure who passed away this last week. This episode, to me, is really about creativity, ingenuity, pursuing your dreams, innovation and embraces those with love that you come in contact with. That’s exactly what this loved one did. We’ll carry his ingenuity and love on with us in this episode and forevermore.

Reggie Rucker:
Luke, my heart, my love, I’m sending it all your way. One of the things I’ve learned in doing this show with you, and what really makes you special, is how much heart and personal touch you bring to every episode and to every story.

Luke Gannon:
Reggie, that really means so much to me.

But speaking of bringing heart to your work, our guest on the show today, Gina Schaefer, is a rockstar who helped revitalize her neighborhood, and brings so much heart and passion to her work. Today, she’s telling her story. Let’s jump in.

Gina Schaefer:
My name is Gina Schaefer. I live in Washington, DC. I’ve been here since 1993. I moved here from Ohio, after growing up in Ohio and then growing to college in Ohio. Studied political science in college, with a Spanish minor. Moving to Washington just seemed logical with a poly-sci degree. I worked for the Children’s Defense Fund. Founder, Marian Wright Edelman was one of my idols. She was my graduation speaker. I moved here to take an internship with the Children’s Defense Fund. Had what I love to call my quarter-life crisis and I decided I wanted to leave the country.

I quit CDF. I moved with a family of friends of mine from Brazil. I lived with them and taught English. When I came back, it was really the mid-90s tech boom, and I spoke Spanish and Portuguese. I met a woman at a tech company who needed somebody on a project that spoke Spanish and Portuguese. I talk about here now and I always chuckle, because I’m pretty sure I didn’t know how to turn on a computer. I was right on that cusp, with a Liberal Arts degree and right on that cusp of computers becoming a big deal in colleges. I’m sure there were many colleges where it was a big deal prior.

Anyway, I took that job. I stayed in the tech industry for about five years, I guess. I got laid off a couple times. I got in at the start of the boom and then I was living through the bust, and got laid off a couple times. Somewhere around 1997, I moved to this amazing neighborhood in Washington, DC called Logan Circle. Logan Circle was one of the neighborhoods that had been destroyed by the riots when Martin Luther King was assassinated. The riots started on U Street in Washington, which is just north of where my office is now, and spread south down 14th Street.

What happened after the buildings were looted and caught on fire, so many people were hurt and arrested, the neighborhood fell apart. A lot of the business owners moved, a lot of the residents moved. What was this vibrant, beautiful Main Street community sat dormant. In ’97, I wanted to buy my first place. A real estate agent said, “Well, the only place you can afford is Logan Circle.” I cried because none of my friends wanted to go east of 15th Street, which is where Logan Circle is located. I decided that I was going to buy that place anyway and started a love affair with a neighborhood that has endured to this day.

Luke Gannon:
Gina settled into a neighborhood with a desolate Main Street. Residential homes and businesses stood boarded up, while numerous abandoned lots dotted the area. Despite the neglected Main Street, people still resided there, each with their own aspirations and necessities.

But before delving into Gina’s journey of establishing her inaugural Ace Hardware store in Logan Circle, let’s rewind further to explore her initial inspiration in economic development.

Gina Schaefer:
My father was a factory worker and a school bus driver. I had a very strong work ethic while watching him hold two full-time jobs. My mom was a homemaker and had a beauty shop in our basement, so she was very entrepreneurial. I think a little bit of my scrappiness came from her doing what she could do at home to make ends meet while my dad worked these two full-time jobs. There was definitely that. I was always very active and my family was active as they could be in the community. Things at our school. It was a small town in Ohio, so everybody knew everybody in a lot of ways. I had a little bit of that already.

Then I went to college. When I arrived … I went to Wittenberg University. Wittenberg, the year that I’d arrived had become the fifth school in the nation to mandate community service for graduation. In order to graduate, we had to do 40 hours of community service. It was 35 hours of direct service, and then five hours of reflection. I always joked that that reflection was therapy for college students who had never done anything good in their lives. Well, I not only had to do my service, but I needed to have an on-campus job as part of my financial aid package and I became a student coordinator of that program. I worked under a woman named Debra Dylan, who was vibrant, and passionate, and had all of these leadership traits that I had never seen before that I wanted to emulate. Oh, by the way, she was teaching us how to just be good stewards of the world by doing all this great community service.

Luke Gannon:
From the outset, Gina understood that merely opening a business wouldn’t suffice without community involvement. She recognized the importance of engaging the community to understand their desires and needs, trying to establish a business that would enrich both the economic and social fabric of the community.

Gina Schaefer:
When I moved to Logan Circle, my now husband, then boyfriend, also decided to move to Logan Circle. We got really involved in the community association. The community association, at that time, was super strong. There was still crime in the neighborhood, there was still a lot of boarded up rooming houses, a lot of abandoned buildings, a lot of prostitution, not a lot of businesses. The community association was really a place for all of us to go to feel empowered, and safe, and envision what we wanted the neighborhood to become. And help the people that were still here that needed help.

At those community association meetings, there were a couple things that the neighbors always talked about wanting. It was a grocery store, a pharmacy and a hardware store. Communities all across the country want those three staples. In 2002, a Freshfields opened, and then next to that a CVS opened. Even if I had been considering a pharmacy and a grocery store, those things were off the table. Which is fine, because I really liked the idea of the hardware store.

Luke Gannon:
Gina opened her first Ace Hardware to provide the community with the nuts, bolts, paint, shovels and all the tools needed to repair the community. It all grew from there.

Gina Schaefer:
As it stands right now, we have 13 locations, about 300 teammates. We’re in DC, Maryland and Virginia. We started out very urban with that one store. One of the coolest experiences in my life truly is that people started writing us, handwritten letters, I wish I still had them, and emails, and phone calls from all over Washington asking us to open in their community. There were very few local hardware stores.

I probably should say it was terrifying. I just remember being excited by it. “Oh my gosh, it doesn’t just have to be one location. This can be something that we grow with.” Two years to the date that we opened the first one, we opened our second store. Then we opened one a year for 10 years, which is crazy growth when I think about in hindsight. We partnered with National Cooperative Bank. They’ve been an amazing funder. Ace is an amazing cooperative. Those 13, over the years, we have purchased five from other retailers, built 10 from scratch. That math doesn’t work, because we had to close two. Two of them failed.

Luke Gannon:
These failures taught Gina lessons about what community economic development really means.

Gina Schaefer:
Businesses don’t succeed in one part if the community doesn’t support them. I think there were two factors in our two stores that failed. We will take as much blame as we should. We changed managers, we increased training, we changed products. We made a lot of changes over the years, because our stores aren’t cookie cutter, to try and figure out what would make them work.

The things that we can’t change are the fees that we pay, the operational costs. Both of them had very high rents and very high utility, just other operational kinds of costs, that we had no control over. Unless we got enough sales to make all of those costs worth it, which meant unless the community supported us in a bigger way, the balance was always going to be unequal. We could not terminate our leases without bankrupting the business, which we did not want to do. We ran those stores for 10 years, with our other locations subsidizing them, until the leases ran out. Had we had higher sales, that probably wouldn’t have been a problem.

We put some rules in place about where we’re going to open. We open in neighborhoods with a strong identity. We open in neighborhoods with a strong sense of shop local. And a name, which we throw in as a joke, because our first location that failed was in a brand new neighborhood with no other stores, so there was no sense of shop local because there was no local. And there was no name. We named the store after the streets, because the community didn’t even have a name yet.

Luke Gannon:
It’s challenging to promote the concept of shopping locally when your store stands alone in the community. There needs to be a cohesive community identity that draws people to the Main Street.

Gina Schaefer:
The first location that failed was in Mount Vernon Triangle in Washington, DC, the neighborhood called Mount Vernon Triangle. It’s interesting because when we went into that neighborhood, there was the physical barrier of West New York Avenue, which is a major, busy, hard to cross street in Washington, DC. Then the community itself was all brand new high rises right immediately where we were. The renters didn’t need to paint or fix things. The brand new condos didn’t need a lot of fixing either. There was a sense … Maybe we tried to do it scientifically at the time, but a lot of those folks buying those places or renting those places worked in Virginia. We really believed that their shopping patterns had been established like, “It’s very easy to go to this Home Depot because there’s a parking lot, and I’ve already driven to Virginia and have my car,” that kind of mentality. Even though we were right in their neighborhood, I think those two forces really factored against us.

Luke Gannon:
Although two of her stores failed, 13 have succeeded. This is in part due to the cooperative model and her commitment to hiring individuals from the local community.

Gina Schaefer:
There are no national franchises for hardware stores in the United States. Most consumers don’t know that. If you want to open a hardware store, you either join a cooperative, you buy from a wholesaler, or you do some combination of the two. That’s how we ended up as a member of the Ace Hardware Cooperative.

That first location, there were almost no businesses that were there, and there were still lots of boarded up houses and buildings. There was an amazing, still is, amazing healthcare clinic in Logan Circle called the Whitman Walker Healthcare Program. Whitman Walker was established in the ’80s, primarily to help gay men with AIDS overcome or deal with the epidemic that was happening in that community at the time. They were in this neighborhood because they could afford to be there and that’s where it grew. Out of that health clinic grew the Whitman Walker Addiction Services Program, which is a very robust addiction services recovery program.

When I opened my first store, I wanted to hire people who lived in that neighborhood who wanted a job in that neighborhood. The first two people to ask me for a job, the first one was gentleman who had been in prison for 17 years but he lived in the neighborhood. The second was someone who was six weeks clean from a crystal meth addiction who was a member of that rehab program. I hired them because I wanted … Well first of all, our community was full of Black, brown and white people, and it was full of gay and straight people.

But when Tommy and Shane came and asked me for a job, they lived in the neighborhood. I didn’t care that one had been in prison. I didn’t ask him, so I didn’t know that until after I’d hired him. I didn’t care that Shane was in rehab, even though he told me when he interviewed. I cared that they reflected the community that I was trying to help rebuild and I cared that they could walk to the store. That store didn’t have parking, neither one of them had a car anyway. I wanted to make sure that everyone could get to work.

Luke Gannon:
Gina, to this day, has continued to hire people from the community, a key reason the Logan Circle store continues to thrive. Gina worked at a hardware store when she was 16, and during that time, they only let the girls run the cash register. Over the years of establishing new stores and refining operations, she has actively sought to empower women in the hardware sector.

Gina Schaefer:
People often say, “How do you compete in a male dominated world?” My answer is always, “Aren’t they all?” I think once you lay the foundation that yes, almost every single industry has historically been male dominated, it doesn’t make hardware any different than running a doctor’s office, or a clothing boutique, or a daycare center, or any other business that you could imagine. I’ll say that I was super naïve rather than saying I was stupid, but because I didn’t know what I didn’t know, I didn’t think that it was weird that I wanted to open a hardware store as a woman.

My husband joined me about three months after I opened. He came home from work one day, he said, “You’re having way too much fun. Can I join you?” It’s our business. Mark and I have been business partners almost since day one, and then literally business partners since three months in. Got bigger and bigger roles at the cooperative, including a board seat and helped create a Women in Retail program at Ace so that all of the women across the country in hardware roles could have more visibility. That’s been really fun to watch.

Luke Gannon:
Gina and Mark are now transitioning the business over to their employees to give self-determination to their workers.

Gina Schaefer:
Ever since we opened people have said, “What’s your exit strategy? What’s your succession plan?” I was so busy trying to build it that I never really took time to think about it. Hardware stores are very multi-generational. We were considered hardware orphans because we weren’t inheriting the business from our parents. Then on top of that, we don’t have children so we didn’t have children to just pass it onto.

When we realized about four years ago that we better get serious about what our exit strategy is going to be, we had contemplated what’s called an ESOP, an employee stock ownership program, but we didn’t understand it at all. I think we had heard the term, we thought, “Oh, that sounds interesting,” we didn’t know what it was. Then two very important things happened.

One, we went to the New Belgian Brewery in Fort Collins, Colorado, which was one of the largest ESOPs in the country. It’s sold, the ESOP sold itself a couple years ago, so it’s no longer an ESOP. But we did a tour of New Belgian Brewery and met a tour guide who was bouncing off the walls telling us that she was an owner, that she owned the brewery. We were like, “There’s something to do this. Why is this tour guide so excited to tell us about this?” That planted the seed.

Then 2021, there were a lot of protests across the country. DC particularly was a hotbed. The protests in Washington started where the riots did and spread down 14th Street on the way to the White House, or on their way to Freedom Plaza. We could see all of these protests from our office. The protesters wanted pay equity, and generational wealth building, and gender equity, and all of the things that Mark and I had really tried to be passionate about throughout our business experience. One day we went out with our team and our customers, and we marched. We came back and Mark said, “I think we should figure out what this ESOP thing is.” That really kicked it off for us. We figured out how it works. It absolutely made sense. We started the process to sell the business to our team.

The first really important piece of information to know is that the employees do not pay any money to buy the business. Once we knew that, we could say, “Everybody can own the business because they don’t have to put any money in.” We’ve sold 30%. Two years ago, we sold 30% of the business. The plan will be 100%, it’s just a little bit of slow process to make sure that the finances of the company always work. I am partners now with 140 of my teammates.

There’s a difference between becoming an owner and being a manager. It’s a constant education process. It’s like a qualified retirement plan. Someone becomes an owner after they’ve worked with us for a year and 1000 hours. I’ve technically retired as CEO, I’m no longer the CEO of the company. But until I retired, every month I would send out letters, “Welcome to the ownership team,” to the new owners. That did not mean that they got any more money in their day-to-day paycheck or that they could make decisions any differently. That is one of the key educational pieces of understanding and embedding the ESOP mentality into your team’s mindset.

But we have a 23-year-old, it’s her first job out of college. She helps us with recruiting. When I hear here on the phone, so enthusiastically explaining to a potential recruit that they could be a cashier and own the business, they could be the paint person and own the business. That’s just one example of how you know that it’s working. I eavesdrop all the time, just wandering around the stores, hearing customer service and conversations. I will hear … We have banners above the cash registers saying, “Employee owned.” I will hear cashiers say, “Yeah, we own the business.” Or, “I will own the business, I just started.”

Yeah, it’s not perfect. It’s definitely an ongoing … I’ve met people at conferences who have been ESOPs for 20 years and they have some of the similar challenges. They still have to explain it to new folks. You have to reiterate it often. Publix is the largest ESOP in the country. They might be considered the largest ESOP in the world, because it’s really a United States thing. Publix has all sorts of case studies I think, about cashiers that have become millionaires, retired as millionaires because they were at Publix their entire career, probably not making a lot more than minimum wage in a lot of cases. But when they retired, because Publix always did so well and was employee owned, they had a huge retirement account.

Luke Gannon:
The employee stock ownership program is a huge move to empower and give agency to the workers. Fortunately, in both of the major cities that Gina’s stores are located in, they’ve been able to fill a niche that the community desperately needed and for whatever reason, big box hardware stores were actively avoiding.

Gina Schaefer:
Nationally, the statistic has been if you have a small hardware store and a big box opens near you, your sales go down 50% the first year, that’s been the average. I have no reason to think it’s any different now, but this is for the longest time, the statistics we were told. If you managed to stay open, you could stay viable for the next year, your sales would come back.

Luke Gannon:
Among the countless moments Gina can reflect on to reaffirm her commitment to serving the community through her Ace Hardware stores, one stands out.

Gina Schaefer:
2014, I have a teammate whose name is Mark. Mark came to me and he said, “The community is calling us Recovery Hardware.” I wrote a book called Recovery Hardware, and there’s a chapter in it called There Are No Tears In Hardware. Let me tell you, I have cried throughout the entire 20 years. I don’t care how beefy people think hardware needs to be, I have cried. When Mark said, “The community calls us Recovery Hardware,” I bawled because nothing that we did was on purpose. It was all to build community and because it just innately made sense to us. That moment made every hardship we had had, every challenge I had had, had made it worth it.

Luke Gannon:
Gina also released a book in 2022 called Recovery Hardware, where she details bringing Logan Circle back to life. Part of bringing a neighborhood back to life is making your community locally self-reliant, meaning creating the necessary resources and infrastructure to thrive.

Gina Schaefer:
Local self-reliance, to me, clearly in the literal sense is a brick-and-mortar Main Street where community members can meet and engage with one another, know the people they’re doing business with and support the vibrancy of the communities they live in.

Often times, I’ll ask my audiences to close their eyes and think about a Main Street that they love, where they feel happy, content. Nobody closes their eyes and thinks about a strip mall in the suburbs. They think about a favorite vacation spot, a beach town, a small town. That, to me, is the kind of community that I want to live in and help build, even though we’re mostly in urban areas.

One of the very first books that I read, that maybe even led me to ILSR in a circuitous way, is a book called Small Giants. The purpose of the book is to spotlight businesses around the country that, in some way, have gotten very big while staying small. I’ll give you an example. The Zingerman’s community of businesses in Ann Arbor, Michigan, those guys are my idol. They have I don’t know how many businesses at this point, 20. But when they started, and to this day remain, they did not want to grow outside of the county that Ann Arbor’s in. Their smallness was geographic. This book had a bunch of examples of businesses like that. It meant, to me, that I could be as hyper-focused in a city as I wanted to be. Now we’ve grown outside of DC now.

It made me think about the size of businesses and their impact in a very different way. I didn’t have to just think of the behemoths in any industry. That’s not to belittle them, but I was able to think about the impact that small businesses can make. And realizing you could stay small while making money, or stay small while growing in a different way.

Luke Gannon:
Gina, it’s such a joy having you on the show today, and even more so for your lifetime’s work of building community power.

Reggie Rucker:
Great job, Luke, as always. Very thankful for you, and of course especially so today. Thank you, Luke. Gina, thank you for joining us and sharing your heartwarming, inspiring story with us and our listeners. These doses of inspiration are always helpful in the world. I feel like we’re all always recovering from something. The stories of resilience, and grace, and perseverance are always helpful. We’re delighted to share that with our listeners, so thank you.

To our listeners, thank you for tuning in. We’ll be back again in two weeks with another story out of DC. But in the meantime, check out the show notes from today’s episode to dive deeper into what we discussed today. As always, you can visit ilsr.org for more on our work to fight corporate control and build local power. We always love your emails, so send us an email to [email protected] to let us know what’s on your mind.

This show is produced by Luke Gannon, and me, Reggie Rucker. The podcast is edited by Luke Gannon and Taya Noel. The music for this season is also composed by Taya Noel. Thank you so much for listening to Building Local Power.