Interior expansion: interior designer FineDesign catches the eye of big-time furniture retailer Robb & Stucky and expects to double its business within five years

South Florida CEO,  Nov, 2007  by Robin Shear

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FROM A 57TH-FLOOR office, high above the streets of Philadelphia, Steven Zelman surverys FinaDesign Interiors' newest location, the third for the Hallandale Beach-based high-end interior design firm. Zelman, the firm's president, oversees every design team for the firm's 40 to 50 jobs a year, at an average rate of $600,00 each. FineDesign, which has maintained a Las Vegas satellite office for a couple of years, expects to open additional design centers in Manhattan, Destin, Fla., and Houston during the next year to two.

The expansion is backed by Fort Myers-based furniture retailer Robb & Stucky Limited LLLP, which acquired FineDesign in April 2006. "We were in a local marketplace and I'd always had the dream of growing into the national market, but that takes a lot of capital," Zelman, 43, says.

For the first subsidiary in its nine-decade history, Robb & Stucky provides capital, back-end support, an international client base, plus delivery trucks and warehouses around the United States that FineDesign can access. In turn, FineDesign's freestanding design centers allow the retailer to target clients who would view even stepping foot in a furniture store as lowbrow. "As a retailer we prefer to go in and open our own store, and put the culture in from day one," says Clive Lubner, Robb & Stucky's CEO. "But the acquisition of FineDesign ... gave us another avenue of going at that ultra-luxury market [because] a certain portion [of those clients] will not come into retail."

Zelman says the fact that the two companies serve the same industry, but differently, is a plus. "They do interior design work and retail. We're strictly a design firm," he explains. "I don't do a room; I do complete residences. I put together concepts."

About two years ago, Zelman went from executive vice president to the helm of the residential interior design firm (then known as The Home of Fine Decorators) when Ted Fine, its owner of 34 years, retired. The firm had annual revenue of around $20 million at that time, Zelman says. He projects $27 million in revenue for the July 2007 to June 2008 fiscal year and thinks FineDesign can get above $50 million during the next five years by adding new markets and growing at a rate of $5 million a year. As he adds design centers around the US, Zelman expects to grow from 80 employees to more than 100.

He is carefully choosing markets for expansion. Generally, he partners with developers who are building new residential projects, designs their models and sales centers, and sets up shop in or near the sales center to offer design services to buyers. That primary relationship builds traffic and name recognition for FineDesign. "We're not interested in pounding the pavement," Zelman says. "Advertising has never been a big thing for us." FineDesign already has longstanding relationships with Aventura-based Turnberry Associates Inc., partner in the Destin and Houston design centers, and The Falcone Group LLC of Boca Raton, its Philadelphia partner. Zelman says plans are also under way for a joint venture with a large New York-based commercial design firm to go into a 17,000-square-foot space at 19th and Broadway in Manhattan.

Robb & Stucky's Lubner says there will be "other opportunities around the country as we pick up more developers." He expects FineDesign to eventually account for about 10 percent--and perhaps up to 12 percent--of Robb & Stucky's revenue, which the company says topped $300 million for the 2006 fiscal year. Robb & Stucky has more than 25 retail showrooms in the United States.

Lubner will not say exactly how much Robb & Stucky has invested in FineDesign, but considers it a substantial investment and alludes to a "couple of million" for each component so far: acquisition, the Philadelphia opening and relocating FineDesign's Hallandale Beach home base to a 42,000-square-foot spot in Dania Beach, set to open Feb. 1. That makes "a few couple millions," he quips.

For Zelman, Robb & Stucky was a logical choice in acquirer, even though it was not his first opportunity to grow substantially. "Venture capital was all over the place," he recalls. But he worried those investors would break the business up and sell off its parts. Robb & Stucky executives "know how to run the back end of the business.... They actually understand how to grow us," Zelman says. It has also given FineDesign marketplace pull. "Where I used to buy $60,000 a year, they buy $6 million," Zelman points out.

But one competitor claims FineDesign was struggling at the time of the acquisition. "There was no secret that they bought the company at a very favorable price because the company was not doing well," says Steven Gurowitz, founder of Interiors by Steven G. Inc., a 25-year-old high-end interior design firm with a staff of 70 and offices in Fort Lauderdale and Manhattan. "When a company doesn't do well and you see you can turn it around, why not make the purchase?"