Room & Board: John Gabbert. A Broken Deal, a Family Rift, and the Birth of a Furniture Giant

Transcript from https://podmenti.com/t/78b55ca9c97c25d0

One of the big decisions we made was there was a location in Los Angeles that I fell in love with.
And we sat down as a group and said, Okay, can we do this? You know, the furthest we gone to Chicago, we don't know what to do.
And we just said, no.
Well not
Ready.
And
To me it's an interesting point of view because
People remember the decisions that they made where they did something?
Sometimes the decisions you made where you did nothing?
It's the most important decision in the business.
Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements.
They built.

I'm Guy Roz and on the show today how John Gabbert left his family's furniture business to branch out on his own with room and board.
A national brand that was inspired by
My idea.
Many, if not most businesses we profile on this show started with an insight that the founder or founders translated into opportunity.
And for John Gabber, that insight happened on a trip to Sweden.
It was the early nineteen seventies, and on that visit.
He walked into a store that at the time most Americans had never heard of.
It was called IKEA.
And what impressed John wasn't just the designs he saw, though that was part of it.
What struck him was the whole idea.
That a store could design its own furniture, control how it was made.
Keep costs down.
And then sell it directly to customers without all the layers in between.
And when John came back to Minneapolis.
He couldn't stop thinking about this concept.
Пизем
He was working for the family business.
A furniture store his dad started called Gabbard's.
Gabbert's was a pretty successful local business.
But what it sold was completely different than what John saw in Sweden.
Gabbard's furniture was the kind of stuff your parents or grandparents might have bought in the 1950s.
But this was the 1970s. Baby boomers were starting to buy homes and build families.
And John believed that these customers would want more modern designs, more functional and more affordable.
Unfortunately, John's dad didn't see it that way.
And over time, their differences in vision started to create real tension.
And that tension would eventually lead to a decade-long family estrangement.
John walked away from the family business and bought out a small experimental division he had created inside of it.
He called it room and board.
And over the next two decades, the brand would evolve into a modern, mainly American made furniture brand.
Known for its use of steel, solid wood, and natural fabricks.
Today, Rumen Board sells hundreds of millions of dollars worth of furniture a year and the company has never taken on outside investment.
Like the customers who originally inspired him.
John Gabbert is a true baby boomer.
born just after World War II in nineteen forty six.
He grew up in the suburbs of Minneapolis, working at Gabbard's from a pretty early age.
And while we might associate the nineteen fifties and sixties with mid-century modern furniture,
John says that is not what was selling in Minnesota at the time.
People today think of mid century
As being popular then.
But
That was not the popular design at all. The popular was more of this American colonial
Turned legs.
Fabrics that had
Prints and flowers and birds on them.
It was very Americana.
Sort of feeling.
Where was the f was all the furniture at that time that he sold was it made in the US?
It was.
It literally was all made in the United States. And was it made locally or was he importing it from or bringing it in from all over the country? You know, uh uh North Carolina um was really the headquarters where f furniture was made, but there were some made in New England. Uh
Michigan, Grand Rapids a little bit. Still today, right? North Carolina and Vermont, and even Michigan has still. Exactly. Exactly. But North Carolina was by the by far the focus of it. Family businesses in North Carolina that made the bulk of the furniture in the United States.
So
I guess
From what I understand, what made that store
interesting and different was that at the time a lot of furniture stores would just have
furniture displayed like you would just see
Rose of chairs or rows of desks or beds.
decorated them as fully decorated rooms so you could see what it would look like in a room. Was that unusual at the time?
That was unusual for retailers at the time, but it was a fairly common practice in North Carolina as manufacturers displayed their product.
To sell to retailers.
And my dad hired one of the designers that worked in North Carolina.
to do the store and present the furniture that way.
I read that he he designed a part of this furniture store for
Where people could sit and have coffee.
And there was even like a an area for kids to play at. I mean this isn't the
Sixty seems
Really unusual.
It was really unusual.
And you'll talk to adults today.
That's a I remember when I was you know, fifty years ago I was a kid and and spent time there.
Yep. So as a kid, like as a high school kid, I mean w w was your
life w weekends and and after school working the store?
I um I would work in the store summers.
Probably starting when I was sixteen or seventeen.
Yeah, I would just
Do basic movement of product and unpacking and that sort of thing.
And did you I mean was it kind of assumed?
Uh
Either in the family or even from your perspective that you would join the business?
Yeah, that's an interesting question because
I I think about that today and I just never
I never asked the question. I just assumed
That I would go into the business.
While you were in college.
Um, were you also working at the store?
I was, yes. Yes. I I I went to University of Minnesota and I actually um
I don't have any degree.
I rejected taking a lot of the required courses.
I took business courses, design uh
art related courses. I knew I was heading into the business.
And um it's a combination of I was being groomed.
And I think my dad had worked really hard his entire life.
He had uh purchased a home in Florida.
He'd fallen in love with
Golf?
And basically for six month months of the year he was gone.
And so as I started working.
First as a salesperson, then picking up different management roles.
In a fairly short period of time, I was running the business.
And what did that mean? Like you were um you were dealing inventory, you were managing personnel, people, the staff.
All those things? Yeah, very quickly it was everything. Yep. And he acknowledged it and I was president at
Um, I think I was twenty three.
How did you learn?
how to do those things.
You know, managing people, for example, how
What do you remember about learning how to
Be a boss.
I I don't know initially how I learned it. Um I guess much of that came later through reading.
I must say Jim Collins, uh
Good degree.
Yeah, great books about what it is to be a manager and all of that. I don't remember the exact year I started reading that, but that literally became my Bible.
Um Margaret Wheatley. She's written several books about
Management and a kind of
Different point of view.
Uh so she was the second influence on me?
I think I just feel comfortable. I just feel comfortable making the design, merchandise decisions.
Um I I basically felt comfortable managing people who were older than me.
Um which almost everyone was.
Do you remember finding it stressful or challenging or
Or do you remember?
Do you remember it being like
Thrilling and exciting.
Probably initially exciting, but over
А реально шорт перів там, а пикам фрустративу the process.
Um so the pr the you know, it was a process where the manufacturers really control the product.
You went to a market, you went to different manufacturers that were well known then.
And you'd select, Oh, I'd like to carry this or that or whatever, or they'd say
You can't carry this because Dayton's now has it or somebody else.
And it was especially complicated because
They didn't never make the product for a very long period of time.
So there was tremendous turn of product.
Based upon the manufacturer's
decisions to carry something or not carry it. If it sold well for us in Minneapolis, it may not sell for the rest of the country.
And
they would drop it. So you'd s you'd be starting over.
So I I became quickly frustrated with that process.
And then the salespeople were all on commission.
And I became very frustrated with that process.
Because the truth is if somebody's
Working for you on hundred percent commission.
They're working for themselves.
They're not working for you.
All right, let's break this down a little bit. So
The employees were on
a hundred percent commission, which I don't think that you can do that today. I think in most states it's not probably not allowed. I think you have to pay a salary, but
in theory, you could do very well or you could do not so well. I mean, you could walk out of of working a whole day and have and make zero dollars in theory.
Exactly right.
And I don't think they were doing what was
actually best for the customer.
Because they were really just trying to make a sale.
They were just trying to make a sale.
Got it. Okay.
Um
The other
Part of it is you were getting your furniture from
manufacturers North Carolina and m and New England and
and maybe Michigan and you had no input. Like if if they whatever they made
you sold. And and but I think that's that that makes s sense. I mean obviously
But
From their perspective, they're thinking, Well, you guys are just a sales channel. Like we make the thing and you put it in your store and keep your mouth shut and sell it. Exactly.
You know, we were one retailer basically in
Minnesota. I mean it not a lot of impact to them at all.
They were doing their own thing.
Yeah.
You probably did not have much.
much pull there, right? You didn't carry a lot wheel. Not at all.
But um
In nineteen seventy two
I I took a tour with a company to visit other retailers in the wor around the uh Europe primarily.
And I went to Ikea.
And at that point I think they had a couple stores in Sweden and one in Germany, maybe.
But as I as I learned more about what they do, it the design. I really was fascinated by the design.
And the whole process of lower cost product that's well designed.
But what really fascinated me was their process in that
They designed everything.
And then they went to at that time Eastern Europe.

So they kind of turn the process upside down.
And and they said
We are the creators of the product. You are gonna be the manufacturer and manufacturer.
What we determine
For the value that we want.
for the period of time that we'd like you to continue to make it.
And that really hit me as oh, this makes a whole lot more sense from a retailer's point of view.
So essentially when you saw IKEA
In Europe.
This is the first time that you saw.
a a furniture company a furniture store that actually was selling furniture that they designed
Yes. And so the manufacturer was just making their designs to spec.
Yeah.
That must have been like
uh road to Damascus moment like so revelatory. It was, absolutely.
I mean I just I just remember being startled by how much sense it makes.
Um knowing that the frustrations are with dealing with American manufacturers, the way the process was set up.
And um I I couldn't do a lot about it at that time.
But I tucked it away and knew that that's what the future needed to be.
Okay, so you have uh this trip to Europe, you see IKEA.
And
You come back.
to the US and you're running gabbers.
And you were seeing at Gabbert, you were seeing
Stuff that was that
I guess sounds like you didn't really like a lot of the stuff that was being sold.
Yeah, I you know, it's what happened though is I started changing things.
At Gabbard's and I found a little
little openings, right? So I found a New England manufacturer that wasn't doing all that great.
And they were really interested in a true partnership.
In terms of
product being designed together or being
uh literally vertically integrated as a manufacturer and retailer.
And I started down
That road of finding those people that were
Different kinds of manufacturers.
And
What's the idea you had? I mean, you you start to you start to figure out how can we take some of this IKEA model
And apply it to Gabbert's.
Um
Is that is that fair? Is that what you were s starting to think? That's that's totally fair. Yep, that's exactly right.
So how are you gonna do that?
Well, there was it was mostly imported product. There was some made in the United States. Um
We just opened this small department.
inside of Gabbard so put together
Originally.
I think we then call it home and company. And it was like a section of gabbards, and we just say home and company, and it was just modern stuff that you would assemble at home.
And it was a small section. You know, if the if the store was a hundred thousand square feet, this was
Four thousand. And much less expensive than what much much less expensive. And how did it do?
Um it did fair.
Just fair. Not great, but it was okay.
Okay, so so what this this kind of
Furniture line that
had different names.

put together and then home and company. It eventually you guys
Start calling it room and board.
Yes.
I just sat down with a couple of friends and we talked about names and something that was not too specific, so it
It had some reference to home.
Um
I think I realized later that uh Roman board was more of a
Uh Midwestern term?
In East Coast, it's like
Demon Borg?
Um
But
It worked and
That's how we got it. It was just a
Uh
Maybe not very thoughtful process, but
One that has worked. Okay.
Okay, mean time the family business, Gabbard's, is expanding, right? I mean you
You I believe open a second store in Dallas in nineteen seventy three.
Uh and then at some point, maybe maybe it's around like nineteen eighty.
You actually approach your dad with a
proposal to take over the business, to take over Gabbard's. Um t tell me about this idea you had.
Well I it it was first came I was um
On the National Home Furnishing Association board of directors.
I was the youngest member by
maybe fifteen or twenty years. Um, so we'd have our board meetings, and after the board meetings, you know, you'd sit around and talk and have a beer. And it seems like the conversations for most of the other board members who were in their
Fifties.
Evolve to
You know, their old man still owns the business. What is the transition like? That typical generational transfer.
Um
So I I listened to that and I went back to my dad.
This must have been in seventy seven, maybe?
And I said,
Can we agree that I'm I'm gonna buy you out. I'm running the business, I've been running the business for a while, things are going pretty well.
And um
We had a legal document.
Signed.
that I would buy his sh enough of his shares of the business that I would have controlling interest.
Okay.
So he agreed and you were gonna have uh and and when you
came to this agreement how many years before he would
Uh he would
I'm thinking it was seventy seven or seventy six when we agreed and the the date was October first, nineteen eighty.
He would step aside, you would buy his shares.
Yes. And then you would become
the full owner of Gabbard's.
You could I would be the controlling owner. I had siblings that still own some shares. Yep. Got it. Okay.
Um, okay, that date comes, nineteen eighty, the t the moment for your dad to sell the shares and what happens?
I I went simply went to him and said, Here we have the agreement and he said, I'm not gonna do it.
I said we have a legal agreement.
And he said, Oh, I'm not gonna do it.
What was your dad's reasoning? I mean he wanted to retire.
He was in semi retirement already, from what I understand, going to Florida.
What was the reasoning he gave you?

I was
Do win.
was going to ruin the company.
I mean it was his baby.
Gabbers was the business that he built.
And I was running it and I was making changes.
And hій thought those changes were serious mistake.
And then you add on what was going on in the seventies in terms of the economy.
Interest rates were crazy. I mean it was a it was a strange time.
Um we were continue to be profit the entire time.
But
But not overly profitable in that period of time. So he just thought
I was it was a big mistake for the business.
He was worried he were gonna run it into the ground.
Yes, exactly.
Well we come back in just a moment.
The family business comes to a crossroads, which might be good for the business, but
Is not so good.
the family.
Stay with us, I'm Guy Raz, and you're listening to how I built this.
Hey, welcome back to How I Built This. I'm Guy Raz.
So it's nineteen eighty and John Gabbard is trying to recover from a gut punch.
His dad has reneged on an agreement to sell John the family furniture business.
So I I I went to my attorney.
And he said, Well, this is the deal, it's it's a clear document.
It will take
Two to three years.
But you could win in court.
If you want to do.
But let's talk about what some of the other options are.
Um
So uh
Май майдаз пропозол а за солюцію.
I would move to Dallas with my family and run the Dallas store.
And my younger brother
would step in and run the Minneapolis store.
And I was said I'm not interested in moving to Dallas.
So I went back to him with the proposal.
That I would buy
What was then Roman Borg as a division of Gabbard's
Um
And basically trade. My stock, I own about thirty percent of the business.
And I would trade that thirty percent.
for the full ownership of Roman Born.
Okay, you had this legal agreement with your dad.
And you
At some point considered.
taking him to court, which would have been very
Uh that'd been a
That's a lot of friction taking your own dad to
Court.
I mean, d did you consider doing it? Was that a something that you might have done?
No, no, no. I mean I sat with the attorney and we quickly said, You don't want to do that. Yeah. That's not something you want to do to your family. It's just disruptive to everybody.
So that's how we said what are some of the alternatives.
And we came up with the alternative of just
My vacating gabbards and buying
what was then going to be a room and board.
Okay, your proposal was all right, fine.
You don't wanna sell me th the business. I just want this slice of the business that I
kinda created this modern
Yeah.
Uh and and what did you
I mean you you had this kinda name that
room and board, but it wasn't a brand, so what what were you actually buying?
I was buying um
Some locations that were open. So we had leasehold improvements and inventory.
Okay, so you actually had
Opened a few locations. Yes, we had opened a few locations. How how many? Do you remember?
I think there were
Three at the time. And they were where were they?
They were in Denver and Minneapolis.
And at that point under the name Rumenboard.
Yes.
First of all.
Was it like what Ikea furniture is today? I mean mostly it's particle board, it's not solid wood, a lot of veneers.
Um assemble your own. Is that what you were selling?
That's what that's what Room and Board basically
was at that time. It was still that IKEA like
product. And that enabled you to sell it for low price because particle board is a lot cheaper than solid. Right. Right. Yeah. And I wouldn't say particle board was the focus, but then there were things made of plastic. There was you know more innovative
Uh
I think people perceived it as temporary furniture. Yeah.
And and by the way.
I think IKEA furniture
Much of it is high quality. I think it's ver it's a great you know, value for money, for sure. But a lot of it is particle board and veneer and you know, not always
kind of furnace you're gonna have for twenty five years.
Right. Uh but the price point reflects that.
Yeah. Exactly.
And so your customers were like
What I mean college students or people out of college, young people, you know, with their first apartments, that kind of thing? That and then older customers in secondary parts of the house. And I'll do the basement for the kids, that kind of thing.
Okay. So you gave up your shares of Gabberts, which were worth
I think about eight hundred thousand dollars at the time.
Yeah.
And
You got
You cut this these three locations.
this room and board which you had started internally in Gabbert's and your
Idea was okay.
Let me see what I can do with this thing.
Yes, exactly.
Um, before we get to what you did, let's talk about
The
this decision in general. I mean, you are leaving the family business that you had run at this point now for, you know, almost a decade.
Your dad uh
he kind of decides that he does not r want to go through with this plan that you guys had agreed upon.
Uh what
What did that mean?
for the family.
Did I mean it must have been not an easy time.
No, it was it was not an easy time and it was a little more complicated because
I owned about thirty percent of the business. I had three siblings that each owned about ten.
And I sat with each of them and said
Okay, here's your choice.
You can vote with me.
And I'll continue to run the business, and this is my future.
Or you can choose
Not to vote with me.
And and they all chose not to vote with me.
So that complicated it.
It even more.
Wow.
Do you gone to your siblings and said, Hey
If you guys
vote with me, we have sixty percent control.
and you know, I'll run the business and I I'll I'll grow it. If not, you know and they decide not to. They went with your dad. Yes, exactly. And so
I'm sure this is not easy to talk about even now, decades later.
I'm sure it's
still quite painful, but um I mean it's also business

That happens in businesses, right? Family businesses.
Uh we've certainly
dealt with it on this show. That's not just a business.
Dis disagreement.
Family fallout.
Very, very personal. Absolutely.
Yeah, no, I did I basically didn't see family for at least ten years.
Wow.
So you you kind of I mean
You were estranged. You were estranged from family.
Yes.
But also living in the same city, right?
Yes, oh yes.
So did you just stop talking to them?
Oh yeah, yeah.
Yeah, it was difficult.
And on top of that
You're competing.
Now against your family.
Actually, strangely enough, not directly.
For the first years.
Um I kind of avoid it.
What that was? So room and board
stayed what it was, which is more of this Ikea like product, which didn't compete directly.
Yeah, I think I
Um
Subconsciously said that's fine.
Um
It's interesting. I spent those next six or eight eight years
I did a variety of things. I started a business called bedrooms for kids.
I had a wholesale showroom. I bought a design studio.
So I spent as I look at it now, I kinda wasted eight years.
Doing

Tell me why. What do you remember about that time? You thought it was better to just be diversified?
You know, I really asked I'm asking I asked myself that question today and say, Well well what was I thinking? Why did I try those different things?
And um
I I look back. It was a bad it was not
Okay.
A good time.
From a business standpoint.
I was doing too many things. It was just a mistake.
Were you making money yourself?
Um some
But not a lot.
Um
And it it didn't
I didn't feel like I was
Doing something that was important to me.
I s I started having this clear vision.
Of what
room and board could be.
And as that grew in my mind, it became clearly clear to me that
That's way more important to me than doing all of these other things.
Okay.
This is happening against the backdrop of
a family rift that had happened. So there's that personal
a component that is not easy.
And then there's the
professional component which is
It is what it is. I wonder, do you remember at that time, between nineteen eighty, let's say nineteen eighty and nineteen eighty eight,
Ever having doubts, ever thinking
God, I think I might have made a mistake.
I don't think I had doubts about my choice at Gabbard's initial choice.
Right. I I I knew that was the right thing to do.
Um
I certainly started having doubts.
about the focus on those different businesses.
And and that's when I really it was about eighty eight, eighty seven that you know, I turned forty.
It's a time when you think about life and you say what's the rest of it gonna be?
And and
That led me to
to really reevaluating the whole process.
And making the changes pretty quickly.
Alright, so you decide.
to give up on these other businesses the the kid kids' furniture and the
I guess the design studio and and really focus on room and board and
And I guess one of the things you do is move your store in Edyna into a much
Bigger space, right?
Absolutely. And
It the decision seemed pretty easy. We moved room and board into
This much larger building.
And


Department, if you will.
Which focused on
Better quality, American made.
At a considerably higher price.
And
I think the shock that hit us is our room and board customers.
Once they saw that.
They bought it.
The bought it.
Readily and easily.
Opened her eyes to the fact that
This customer we were trying to appeal to
You know, out of college, not a lot of income.
Uh they don't mind having the Ikea like product.
Well now it's ten years later.
And they're established in their job.
And
They want more not temporary furniture, they want permanent
Firmature.
And they saw what we had, which was really
Quite beautiful, American made.
And it?
Sold way more than we expected.
Okay, so you
You've gotta
Expand and now you have an opportunity
To add a new line.
And you s you decide okay.
Let's go up a notch.
And we'll still sell this flat packed assemble at home stuff.
But let's see if we can m make more sort of
high quality design furniture.
But who is gonna make this stuff?
Well
We were aware of a few of these
Mostly New England manufacturers.
Some in the Midwest.
That made
This beautiful quality product. Okay. And so were you going out to these places yourself and saying, I like that, I like that, I like that? Like'cause this is before the Internet. This is
Yeah, there were catalogs, but these pl places didn't have catalogs. It was it was a few few people in a garage. Not a garage, but in a small warehouse.
You know, strangely, one if there's a furniture market in North Carolina, right, where everybody everybody shows, and usually these little guys don't show, but the state of Vermont
For one market.
Happened to
Rent a space.
for these different Vermont manufacturers.
And we happened upon those people.
About that same time we were going into that space.
And they that became our initial connection.
So so the the design pieces from Vermont
What did those look like? I mean, did that how would you describe that look? Because
I think you were going for a very different kind of look than a Gabbert's or a store like, and probably most furniture stores in America.
We're like Gabbard's.
Yes.
It was very different look.
Um
The the focus was really on the wood itself. So it was like classic.
Simple designs.
That really focused on the beauty of the solid wood.
They have a reference to
Arts and crafts.
They have a reference to some
Japanese design. There's been periods where there's been a reaction against
Overindulgence and too much decoration.
And it's more about the simplicity.
And that's what this product

Yeah, you know, it's interesting. I because it's hard to describe like
You know, people will say, Well what what
How did you know what to pick? And your answer probably is gonna be something like I picked what I liked.
Right. Is that mm is that true?
True. Yeah. It's very true. And here you are. And not and please don't take this the wrong way, but
You grew up in
you know, the suburbs of of Minneapolis in
the fifties and sixties. You know, you had a shop in a dina
Minnesota.
And
You had developed a pr I think a pretty sophisticated design sensibility.
Yes.
I think that's true. How how did that come about? What what
Influence that.
I think something that influenced it.
As much as anything else, even though it's not direct.
It's the Walker Art Center. Ah.
Interesting. Yes. And a significant museum.
Significant museum.
Um with a very modernistic point of view. Yes. I mean it's I think it's considered the third best
Contemporary modern museum in the country. Yeah. Behind New York and San Francisco.
Um they were in the forefront of doing all kinds of amazing things.
Um, especially as artists were developing and coming along.
So it was just um
It was exposure.
to a pretty sophisticated point of view of design.
That was be unusual for Minneapolis.
Do you remember any particular
Artists that
Struck you? Oh my my favorite of all time is Martin Purier.
Mm.
Who's a sculptor. I've actually have several pieces and have given a couple to the walker. And he does a lot of stuff in wood, right?
He does a lot of stuff in wood, but also in metal and bronze.
Y you know, simple little things like I don't remember the art itself, but I remember the framing.
And some of the pieces was just raw still.
Simple steel that was welded, you can see the weld marks.
And I I looked at that and it hit me oh
How perfect for furniture.
That's really interesting. That makes a lot of sense because
Anyone who knows room and board furniture will know that
That a lot of your iconic pieces

Exactly.
Like tables or or kitchen sort of islands, or you know how to do it.
It's
And you see the steel like on the
the credentials, like you see the steel legs. Yes.
So so that's that that was the and I think that was the single biggest influence that came from Minneapolis.
John, I'm curious about
the storytelling side, because I remember the first time going into a ruined board store
And seeing little signs like
This is this is the guy in Vermont who makes this, or this is the person who designed this. Now you see this everywhere, right? And you even see it at IKEA.
Right um and tell me about how that started. I mean
Did it start because
You felt like
you wanted people to understand why these pieces were more expensive and why they and and what the reasoning behind it was. Like I guess to sort of telegraph the idea was that this is high quality and and and artisanally made and and designed in the US. I don't know what
What was the
What was the sort of the
the spark that that had you guys
start to tell stories around the pieces of furniture.
Information from our design associates in the stores kind of referring how much people like to know

Spent a fair amount of money for
What the story is behind it.
Mm-hmm. And where it was made and why it was made that way and what the materials are.
That's not everybody, but a certain percentage really want to understand that.
That that that's that's a connection to what they purchased.
Okay.
So you are um
You you're working with these designers or manufacturers, you get these pieces in
And again, like you're picking stuff out that you like, but
with the idea that it was going to be purchased by people around your age, let's say
Professionals between thirty and fifty.
Mm-hmm.
Correct.
So um you open this location up and and how does it do?
I I think that was it was a moment that really room and board.
It it gave me confidence to take room on board.

These things that that
You would not think our customers would be interested in at the price point seemed too high.
Um
And it sold really well.
And it just told me oh.
This is the time to change. This is the time.
To move on to the next phase.
Of what of what it can be.
When we come back in just a moment.
John starts getting calls from investors looking to cash in on his success.
And why he says no
To all of them.
Stay with us, I'm Guy Raz, and you're listening to how I built this.
Hey, welcome back to How I Built This. I'm Guy Raz. So it's the early 1990s, and John is starting to develop a distinctive room and board style. And he's making the furniture in just the way he'd imagined years earlier when he made that very first trip to Ikea.
The way we did that was a s a process of finding people that could make the product.
Um
And steel was the actually one of the first great examples. So so what we would we f we found a uh actually a security gate manufacturer in a tiny little factory and said, How about making some furniture. They made security gates.
Security gates. And you said make furniture. And we said make furniture.
And it would be it would be the frame of a sofa or it would literally be
What would it look like?
The initial pieces were a uh
Dining table?
Uh-huh.
And you just take two inch by two inch steel. Okay. And you make
The classic person's frame.
Yeah.
You have a different levels of tops that sit on it, different kinds of tops that sit on it.
Okay, these Parsons tables uh I don't know if everyone knows them, but it's
It's a it's a very simple
minimalist table. It's a long table. It's got four thin steel legs, very strong. And then the on the top you can put
Wood, you can put uh marble, you can put um wood tops, marble tops, glass tops.
It's it's one of our best selling products today. To this day.
Today that same product, same manufacturer.
Um
Yeah, they're a second largest manufacturer today, as a matter of fact.
The same company that m that you worked
Yeah.
mainly making your steel frames for your tables.
Yes. And how did you come up I mean, who even thought of
Let's go to these guys you're making steel gates.
And have a make furniture for us and and make a
Was there w what what inspired that design what which would become this best selling product that you would have?
I mean, I think that's what I bring I brought to the business then, not so much now, is is that inspiration for design just'cause I'm so interested in it.
Um
Pretty soon you find the right partner and then it gets pretty easy and you do one and then you do more and
First he did tables and then he does beds and
The way I describe it often if you buy it
Table and
Chairs from us.
It probably is coming from four different manufacturers.
'Cause the person that makes the chair well
Is not the same person that makes a wood top well. The person that does the upholstered seat
is very different than the person that makes the wood chair.
So the unique thing we bring to the process is we bring the design.
And then we have these different manufacturers.
Make the components
Which actually reduces the cost of the piece because we got these specialists doing what they do really well.
And it has the bonus advantage of
Now you've got lots of choice.
So now instead of having just two choices for the table, you've got
twenty choices for the table,'cause you can have these different tops. So it's almost like a like an ascent like a supply chain for cars, right? You know, the components come to a factory in, you know, somewhere in Michigan and then the
That's what was happening. You get you're getting different pieces from different places, and then you guys could put it together. And that ultimately would save you money.
That will ultimately s save us money and it gives the customer considerably more choice.
Interesting. Okay.
So
You've got this, um you you've got these pieces coming in into your shops, and you've got three stores.
Uh and then you open
I believe the fourth store was in Chicago.
Yes.
It's around nineteen ninety three. And Chicago is a design city. It's one of the centers of design.
And the world.
Yes.
Yes.
I think that the whole transition to what Room and Board is today started with a point of view
About design.
and value
And
Lot of that came from
What the manufacturer's capabilities were.
I mean, obviously one of the big questions we had in the beginning was furniture was not being made in America.
Um by the time
We got to this point in our career.
Imports were the primary
way product was made. If you almost go anywhere and you buy
But furniture in America that's made overseas.
Yeah. And w we actually went through a really thoughtful
question about can we make
Product in America.
That's completely competitive.
And we determined that that the only advantage it's you have making it in China is wages, right?
It's about a thirty percent advantage in cost of product.
Well
We felt like between
Freight.
And quality and a series of other th we could make up that difference. So we could totally make competitive product in America.
Given the design of the product that we focus on.
Where it's really more about material.
The cost is
you know, there's a there's a ratio always in making something between the material and the labor. So if you're making a simple classic something out of solid wood.
The the labor cost is a fairly small percentage of the cost.
If you're making something very elaborate.
The labor cost gets to be a pretty high percentage and the advantage of making it
overseas it becomes pretty significant.
Yeah. So our our design
and approach allowed us to compete really effectively.
With imported product.
Yeah, and and you had a
A very strict approach at that time. I think there was like
Uh there would be no sales.
No volume discounts.
No discounts for like
interior designers, which they get, a lot of people don't know this, they get them.
Yep.
I think some of them those rules have changed, but this was really a hard and fast rule for those first
For several years, right? Yeah. Yep. And why why was that?
Why no v no sales or no no discounts?
Yeah, it comes from a basic philosophy of
personal philosophy say I want to treat each customer
They're like my best friend.
Yeah.
Right.
That's just like a core approach to think about how do you answer these questions.
And
Yeah.
Why would you do that, your best friend?
You say, Oh, you know, if you came in last week it was gonna be twenty percent lower in price.
So everybody's buying product a different price.
It just didn't seem like a fair thing to do to customers.
So we just said
We're not gonna have sales.
It's one fair price, and it just makes it simple and easy.
The happen.
A consistent
Offer for your customers.
It has a side benefit of it evens your business pretty
If you have a sale, you're creating peaks in your business. So they got the back end of the business, which is handling the product and delivering the customers. Now you're dealing with these ups and downs because of the sales.
Without sales, you've got a pretty steady straight line of business going through.
Yeah.
And you became
a logistics business as well. You're not just
A retailer.
You're not just uh design having
Furniture made to your specifications now.
You're also
Taking over the
The
the logistics part of it, the d like even the delivery to the customer part of it.
Oh absolutely, yes. We we do that all ourselves.
I mean that's a really critical part of the business and it's often treated in a very secondary way.
And um it's interesting we talked about we opened in Chicago and the surprise in Chicago was
Chicago gets a lot of visitors from all over the country.
And
That store opened and did quite well and pretty soon
We were having to figure out deliveries for
All over the country.
Because the visitors came to the store and bought product. In Chicago, but they might live in San Francisco and you don't have a shop there.
Exactly.
a business would just have a third party
you know, logistics uh company.
handle it. You know, you go to go to Pensky or whatever. Right, right.
And then you get lousy service, damaged product, you know, they don't take it into the home for the customer.
We know how to deliver our stuff and how to
put it together so we're gonna actually employ
the uh the drivers and and own the trucks
Yep.
Yeah.
Of course, we know how it turned out, but that seems like really
Risky, like that's where businesses really can unravel because you're pouring money into something that may actually not be that efficient.
Yes. Well, we actually did a partnership with Allied home movers.
Where
They do the work for us, but I if you talk to their employees, they think they're room and board employees. I got you. Okay. So so that's how it's But it's it's that part of Allied is dedicated entirely to room and board?
Yes.
And and then how did you
Uh now you're you know, we're we're getting into the mid nineties and
What room and board.
Is

unique and you know, maybe there was crate and barrel.
But now you've got design within reach, you've got other
Some other high end design focused furniture stores, Blue Dot coming online.
Um
And I wonder how you
Thought about
differentiating and staying
You know
different from those other also high end, high quality brands.
You know, I don't think we thought a lot about comparing ourselves to them.
We we kind of knew what we wanted to be.
Um we knew which kind of product we wanted to sell, we know how we wanted to sell it.
So we didn't we didn't really stop and compare. We just said
What we're doing is working, it's who we are, and we're not gonna adjust that based upon competition.
But I would think some of these brands would see
the cool things you're selling and just go to those same manufacturers
And have them make a variation of that. So
So didn't did you ever
start to go to some of your manufacturers and say, Hey
Let's do an exclusive deal where you only
Make furniture for us.
Um
We you know, we haven't, but we know that some of those people have gone to some of our manufacturers, like our seal manufacturer is a good example. Which you don't own. It's their they own it. Yeah, they can they can do what they want, but but they're
They're
generally really happy with our relationship.
I mean we are truly a vertically integrated

True partnership.
That that's how I think about it.
Well.
We care a lot about that seal manufacturer, about how they grow, about are they profitable, about how we balance their business that's effective for them.
We work together on new product.
А мі іцулиазин.
But we don't.
So okay, so here's here I'm curious'cause I I you know, now we're we're getting into the
You know
uh into the two thousands, right? You're the nineties you're growing steadily.
And in I think by
I don't know, two thousand four or something. I think that year, maybe two thousand five.
You opened a store in New York and San Francisco, and now you're talking about two of the most important.
sort of retail
spaces in the country, right?
um and competitive and certainly New York.
And uh
And and they they just did really well in those places.
Did you start to feel like okay.
we need to become a billion dollar business. Like
Once you hit a hundred, hundred and fifty million dollars in sales.
Are you thinking, how do we get this to be a billion dollar business?
No.
No. We n we never talked about growth that way.
We never had a plan for specific
growth in terms of what kind of volume it should be.
Um or how many stores we should add.
Why not?
Because um I think you make a bunch of bad decisions when you start doing that.
Um through organic growth you're available to evaluate
What your natural growth is.
And then you're able to take advantage, if it makes sense, you're able to take advantage of opportunities.
um as they come along, rather than forcing yourself to say, Oh, we gotta add a store this year and you make you make bad decisions.
Um

In uh New York and San Francisco.
One of the big decisions we made was there is a location in Los Angeles that I fell in love with.
And we sat down as a group and said, okay, can we do this? You know, the furthest we've gone to Chicago, we don't know what to do.
And we just said no.
We're not ready.
And
To me it's an interesting point of view because people remember the decisions that they made where they did something?
Sometimes the decisions you made where you did nothing?
is the most important decision in the business.
Yeah.
And um so we said no. But
Three years later, we said yeah, we can do San Francisco and New York within six months of each other.
Alright, so clearly
You're growing. And and at this point you you're still entirely
privately owned, right? Like you had not taken on any outside investors.
Yeah. Exactly.
But were you starting to get calls like
Were private equity groups saying, Hey
Listen.
You've got something good going on here, John.
Uh we can really
Scale this.
You can keep a chunk of it, you know, we'll put in
thirty percent and you'll get a big pe you know, c chunk of cash, and but we'll really grow this thing.
Did you start to get approached?
Oh, we got tons of approaches. It was the most common call I got from outside of the business. What would people say?
To you.
Just what you said.
You've got something that works, that makes sense.
We can we can
Make it grow. None of those were interesting conversations or attractive?
No.
No not a single one.
No.
So why?

One, if you looked at their performance generally.
They've they've ruined more businesses that they've grown.
They just
Don't
One, they think they're smarter than the owners, the people that created the business in the first place. Second, they think they can over leverage this thing, take a lot of cash out first, put debt against it.
And
Make it grow faster than it wants to grow.
So they generally cause failures. Is my general t my take on it.
But you could have got I mean it ca I mean
I imagine by this point you're making a nice salary.
And even getting a nice uh uh distribution.
But I mean all of a sudden somebody is like hey
You can get
Fifty seventy five milyen dollars right now.
in your bank account and we'll just take thirty percent of this thing.
And you know, that's can be kind of attractive, especially when you've been working on something and you're now you're in your fifties and
I don't know.
I just had had no interest in that.
I really didn't. I I knew they would ruin whatever it is we'd built. I knew they would ruin up.
And you just said no, I don't even want to have a conversation. Exactly.
Yep.
So
You felt like growth was just gonna happen if it happened.
But you wanted to make sure that it
was sustainable.
Yes.
Yes. And that we were profitable the whole way.
I mean we we early on we just said no bank debt.
Mm-hmm.
We're gonna operate with no debt.
And we did have for years and years and years.
Um
Yeah, it's uh
A a part of our story that I think is important is that
We develop
A
online web business early, early on in the process. Yeah, in like two thousand, right?
Oh no, sorry in like ninety in the nineties.
Yes, exactly.
So it's a huge part of our business.
And I I say this because as we go to look at other markets.
We say, Oh, you know, Bozeman, Montana we're doing
I don't know, five million dollars right now, today.
We say oh at a store, what's the potential?
The potential is nine million. Right.

It makes no sense. Yeah.
So you don't need stores in every city.
We do not need stores.
Okay.
Now we're into the two thousands and you're you know, you're you're hitting like
over two hundred million dollars in sales.
Right.
And then
You've got the financial crisis two tausena eight.
And you're not selling lipstick. You're not selling cigarettes, right? These are things that are you know it's like inelastic products, like
You're selling really expensive high end furniture for people who are buying homes, all of a sudden there's a financial crisis and a
A real estate crisis, a mortgage crisis, the collapse in value of homes. I mien.
Americans, you know, their net worth drops by trillions of dollars.
Uh
This is not good for the construction business. This is not good for the furniture business.
No, no, we took a we took a big dip in sales.
Okay, so you have to understand the economy drops two percent.
Yeah.
The furniture business will probably drop twenty or twenty five percent.
That's just been the history of I as I think through the years. Mm-hmm. Because it's such a discretionary purchase it gets put off.
First thing.
That's what happened back then.
But part of our part of the original philosophy was that
Our goal is to generate an eight percent profit.
Every year you want eight percent.
Eight percent. Which is pretty modest, right? Well it's it's great. But but that's that's not
That's a nice profit, but uh not
Yeah, crazy.
No, exactly. Exactly. But but but part of this is saying that if we generate eight percent profit when times are good.
Sales drop twenty percent.
That basically takes us down to break even.
Right.
No profit at that point.
But we didn't have to cut things.
We didn't have a profitable year.
But we didn't have a loss.
So now we're able to move forward, open new stores. A lot of our store openings are related to downturns in the economy.
What about your inventory?
Were you finding that you had pieces that just
Or
Not moving that.
That w we're weighing you down?
No, I don't think so.
I don't think so. I think if the the the the the the decrease in sales is just across the board.
It wasn't specific product that didn't work.
And and are your do you think that you deliberately
work to get products that had that sort of timeless look that you could sell today or in five years or in ten years from now?
Oh.
Completely.
We don't think of our business as a fashion business.
At all. Yeah. And much of the industry thinks they're in the fashion business. And I think it's a big mistake. We think we're in the business of good design.
So you'll be happy with it.
Five years from now, twenty years from now.
But we're definitely not in the fashion from our point of view.
Yeah.
Yeah.
Okay, so
You get through the financial crisis.
And um and room and board once again gets gets into growth mode.
Um
You uh
You you stepped down officially as CEO in twenty seventeen, you stayed on as chairman, so you weren't involved in sort of the operational challenges of COVID.
But I know that affected
everyone and including you know furniture stores uh because people were not going to visit them and
buying furniture necessarily people were buying.
furniture for remote office space and stuff like that. So there was some, but it was
challenging. Um
One of the things that happened
In the last few years is that
'Cause we we talked about how
you you never brought in outside funding, right? Like you for most of the history of room and board, it was a hundred percent owned by you, right?
Yes, yep, yep. My I've two daughters and they had some ownership, but it was mostly one hundred percent by me.
Okay.
At some point
The business.
started to get transitioned to being
And ESOP, this is employee stock ownership plan. Companies like Cliff Bar did this.
I believe that uh
King Arthur Flowers and Aesop, um
New Belgium was an ESOP, um there's

program that essentially transitions ownership of the company to employees.
Yes.
Over time, they essentially buy it.
Yes.
I mean I was getting to the age where the question is, what's next, right? Who's the who's the owner who's the owner gonna be. Right. And and we looked at all of the options. We looked at going public.
Um briefly. We looked at all of the private equity options, uh, as we talked about earlier.
And look um
The complications and the opportunities within that.
And we kept going back to Eso?
Um and once we came to the
Except and
The way that makes sense for us to do it is have it hundred percent
Owner Finance.
So there's no bank loan involved. We just
We gave a loan to the employees, basically, the ESOP.
To buy the shares from the owners.
at an established price.
Yeah, and once I got comfortable with that.
Option.
um that there's no guaranteed payout, right? You just sold your business
But you don't know if you're gonna get paid or not,'cause you've you finance the whole thing yourself.
So basically, in other words
For the time being, you're giving away your shares over time.
With the promise that you're gonna be paid in the future for those shares. Yes, exactly. And and so when you join Room and Board as an employee.
over time your your ownership increases, presumably. Oh substantially, yes, exactly.
And now they have a stake in keeping it going and keeping it successful because then they'll make more money.
Yep.
It's a really interesting model.
It's a great model that probably isn't used as often as it should be used.
Yeah.
So
We ta we touched on this earlier, more than touched on it, which is
When you left Gabbert's
There was um
A falling out in the family, and that's
That's one of the
challenges and perils of of a family business, they can often lead to
you know, um d internal dissension and and it's hard.
Um
I'm assuming you you eventually were able to reconcile with everyone in the family or or not? Uhhuh.
Yeah, it was.
Was it formal? Was it like a formal kind of sit down or did it
I don't know.
It it was not formal and it was probably
different with different members of the family.
Mm.
My brother took over.
Yeah. And that's probably been the most difficult reconciliation.
Hm.
And it was made more complicated because
He struggled running Gabbers, to be honest.
Yeah. You sold it for almost nothing.
In two thousand and eight.
And Roman Board continue to grow and be successful.
Yeah, was
That's the most complicated one.
Um
How about your dad? Did you were you able to reconcile with him?

I think so, in certain ways.
Um
Yeah.
He he wasn't someone that would necessarily
reconcile his differences with
People.
Whether it be his children or his brother or whatever.
It kinda goes away, but you don't sit down and really
Define it.
He was a man of his generation.
Yes, exactly.
Exactly. The closest the closest thing he came, actually.

This is like
The day before he died. Last thing he said to me.
No, not the last thing he said to me. Second to last thing he said to me. My mom said to him, Okay, Don, what's gonna happen with Gabberts?'Cause they were struggling.
And my dad said, Oh, don't worry, John I'll buy it.
So that that was as that was as close as he came to kind of saying, Oh, okay, maybe this was a mistake in the whole process.
Mm.
It was his way of kind of acknowledging
your success
Yes, he was acknowledging yeah, my success. Exactly.
Yeah. Uh when you think uh when you think about the journey you took and all the things that happened along the way
And the success that this became
Uh how much of of it do you attribute to the work you put in and and the grind and how much do you think had to do with
Luck.
Being lucky, being at the right place at the right time.
I mean I think anybody that's successful you have to say it's it's just it was timing, luck, circumstances.
Um that all that'll fit into it. It's not just what you do.
And I must say, I believe a lot in that uh hardship creates opportunity.
Yeah.
Life's not about how
Fast you run or how high you jump.
But how well you bounce.
That's Sean Gabber.
Founder of Room and Board.
By the way, as John mentioned, the original family furniture business was acquired in 2008 by a larger brand. And today, Gabbard still has two stores in the Minneapolis area.
Just a short drive, in fact, from Ruben Bord's headquarters.
Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show.
And as always, it's totally free.
And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at guyos.com or on Substack.
This episode was produced by Chris Massini with music composed by Rontine Rablui. It was edited by Neva Grant with research help from Ramel Wood.
Our audio engineers were Patrick Murray and Quasey Lee. Our production staff also includes Alex Chung, Carla Estevez, Casey Herman, JC Howard, Sam Paulson, Catherine Seifer, Carrie Thomson, John Isabella, and Elaine Coates.
I'm Guy Raz and you've been listening to how I built this.