Honoring Excellence

The Freedman brothers -- Bill, Charles and Jonathan -- have flown under the radar since they launched their company in 1991. It was a deliberate strategy, and one that has paid off very well for the family-owned business.

“Our growth was quiet by design. We did very little marketing. Growing under the radar was very desirable for our brand,” said Bill Freedman, 41, VP home furnishings, DownEast Outfitters, Salt Lake City.

With 43 stores located throughout the West, DownEast Outfitters now finds itself in the enviable position of being a retailer in demand. Its value-oriented message—the chain specializes in on-trend apparel and home goods—for bargain-basement prices—resonates with today’s frugal-minded consumers.

“Our affordability has been the key differentiator that’s allowed us to grow where many other retail companies are experiencing shrinkage in a challenging economy,” said Jonathan Freedman, 35, who serves as VP apparel. “We’re seeing incredible growth in year-over-year sales and feel very fortunate in this market to be doing so well. We’re all knocking on wood right now.”

The Freedman brothers come from a long line of retailers. Their father operated a drug store and eventually moved on to wholesale cosmetics. But that’s the least of it.

“Both sides of my family were involved in retail going back multiple generations,” said Bill.

But the brothers, who grew up in the New York metro area, were not all that swayed by the family vocation in the beginning. They got into retail as a bit of a lark. Jonathan was only 17 when he started re-selling liquidated brand-name clothes out of the back of his car. When Jonathan’s brothers, away at college in Utah, came home for the summer, they were impressed with his fledgling off-price operation.

“We thought it was a great idea and decided to try it back in Utah,” said Charles Freedman, 43, who is the company’s general counsel. “It’s hard to say we had more of a strategy than to buy low and to make some money for basic college expenses and fun.”

Although they had no serious career ambitions at the time, their father still encouraged them to do everything correctly from the beginning.

“Dad saw it as a learning opportunity for us,” Jonathan said. “So we incorporated ourselves and got a tax ID, and we all worked together to develop resources.

After loading up their SUV with inventory, the two older brothers drove out to Utah, tagging goods along the way. They passed out flyers on the campus at Brigham Young University and sold liquidated merchandise out of the back of a delicatessen owned by a buddy.

“We were getting real crowds, and the traffic kept building,” said Charles. “We started to realize that off-price shopping was not as developed in Utah and the rest of the Mountain West area as it was back East. People were really excited with our discounted merchandise.”

The business quickly outgrew its deli location, and the brothers opened a small store near the campus. They started to source other brands and develop a broader merchandise mix. In 1992, they moved to a better location and opened a second store.

“When we opened the first store, it was our mom’s worst nightmare come true,” said Bill. “She had lived the life of a retailer her entire lifetime. She thought her sons would break the mold and be doctors and lawyers.”

At the end of the second year in business, the Freedmans decided their business had legs.

“We had about six locations by then, and each one was profitable,” Bill said. “We felt we had a very viable business model.”

In 1996, the Freedmans diversified by opening an off-price furniture store. They used the same model that they did for apparel, buying seconds, returns, liquidations, etc.

Slow, steady and conservative best describes the business philosophy of the Freedmans, who pride themselves on running a debt-free company. Their philosophy helped them avoid the mistakes of other retailers, particularly in the early days.

“We had a culture of thrift,” Charles said. “We saw other retailers trying to do similar things as us but with expensive store build-outs and elaborate marketing efforts. By comparison, we built very utilitarian stores and did grassroots marketing. We felt the desirability of our products and our price would drive growth.”

The fact that they were young also gave them an advantage.

“When you are young, you don’t have that many financial needs. We took very little money out of the business—all the growth money went right back in,” Charles added.

The business had evolved considerably in recent years. But the biggest change occurred in 2005, when the Freedmans rolled out their own value-priced, private-label lines of apparel and furniture under the DownEast basics brand. The clothing line proved so popular it was eventually given its own name. Currently, the company operates 25 DownEast basics locations (18 stores and seven kiosks), which are located in malls and targeted at women 18 to 40. The merchandise is 100% private label, stylish and on-trend (average price point is $16). So are the stores.

“We haven’t changed our philosophy in that we still offer a desirable product at a great price,” Jonathan said. “Our stores are more attractive, but we still have a culture of frugality.”

Additionally, the company operates nine DownEast Home & Clothing Stores, which are home-focused but also offer some off-price clothing and the full DownEast basics line); and seven DownEast Clothing Stores that combine off-price fashions with private-label items) and clearance outlets.

“In terms of expansion, DownEast basics is on the front burner,” Charles said.

DownEast basics’ real estate is unique in that the retailer seeks 12-month temporary deals that are fully convertible to a permanent location.

“Our temporary locations look like real stores because we want to give them a valid test,” Charles said. “If a store proves itself, we convert it to a permanent space. If it doesn’t, we close it.”

Approximately 12 stores are in the works for 2010.

“We don’t think it’s wise to flood the market and open a lot of stores,” Charles said. “Measured growth helps us remain debt free, which we think is a powerful driver in our stability during the recession.”

The Freedmans attribute their success to various factors, from their value model to their measured growth to their management team. In 2005, Klane Murphy was named CEO of the family-owned business.

“We were smart enough to realize we didn’t have the expertise to continue to manage our rapidly growing business,” Bill said. “He brought us a level of analysis and expertise that put us in a launch mode and tripled our size during the past three years. At the same time, we can focus on our strengths: buying, merchandising and customer service.”

The Freedmans’ father, 79, still serves as their mentor. They credit him for laying down the company’s golden rule.

“When we started the business, our dad established a ground rule: As soon as the business got in the way of personal relationships, we each had to agree to close the doors,” Bill said. “With that rule in place, we have been able to work out any differences along the way. It’s been our guiding principle and has helped up maintain very healthy familial relationships.”

-- Tariq Farid’s childhood dream was to one day become a surgeon, but as he grew up, he knew his entrepreneurial spirit couldn’t be ignored.

“I loved to grow things from nothing into something—it was exciting, and I was good at it,” said Farid, the 40-year-old CEO and president of Edible Arrangements International Inc., which specializes in fresh-fruit arrangements.

Born in Pakistan, Farid moved to the United States with his family at age 11. He was already an aspiring businessman by the age of 17 when he used a