By Maria Saporta
Published in the Atlanta Business Chronicle on Friday, December 21, 2012
Habitat for Humanity International is going from building homes to developing its own retail business.
The international nonprofit known for building and renovating affordable single-family homes since 1976 is now in the social enterprise business.
It is developing a national chain of stores — ReStore — that is selling discount building products, furniture and appliances as a way to generate new revenues so it can build more houses around the world.
ReStore is both a national and a local story — a concept that is breaking new ground for the Atlanta-based nonprofit — one that has the potential of raising hundreds of millions of dollars for the organization.
“We are looking to create a sustainable business model for ReStore,” said Larry Gluth, Habitat’s senior vice president for the United States and Canada. “This is like taking a chunk of clay and molding it into a beautiful vase. The assets are largely in place.”
Gluth, a former Starbucks executive with a background in franchising, envisions Habitat opening 300 to 400 new ReStores in the next five years — potentially generating $1 billion in gross revenues and between $300 million and $400 million in net income.
“We have estimated that with those type of increases, we could serve another 25,000 families a year around the globe,” Gluth said. “What has really resonated with the donors is that this is a wonderful social enterprise. It is a sustainable model that generates funds for Habitat. And we kept about 200 million tons of material out of landfills last year.”
Habitat International has just received a $1.5 million grant from the Robert W. Woodruff Foundation to help create a regional cluster of ReStores in metro Atlanta.
The collaborative venture will give Habitat International the ability to develop and operate Restores throughout the metro area. If the pilot concept is successful, Gluth said that Habitat will explore creating other regional clusters of Restores around the country.
At the same time, one of the local affiliates — Atlanta Habitat for Humanity — will be dramatically expanding its ReStore when the local nonprofit moves from its cramped leased space on 3 acres at 519 Memorial Drive to its new, more spacious 5.3 acre-headquarters just a few blocks away at 824 Memorial Drive.
Atlanta Habitat currently is in the midst of a $12 million campaign for the entire project, with $3.35 million going towards buying the land and the art deco building that used to operate as a transmission parts business. Habitat has been able to acquire the building for a fraction of the $8 million that the most recent owner had paid for the property.
The campaign also includes $4.66 million to renovate the building for Atlanta Habitat’s headquarters; $2.27 million to build a significantly larger Restore — from 14,000 square feet to 25,000 square feet — coupled with the ability to increase its sales and profits.
“Early on when I came here, a lot of people would want to give us leftover doors and windows, and we had to say ‘No,’ ” said Larrie Del Martin, president and executive director of Atlanta Habitat.
Knowing it was not smart to turn away contributions, Atlanta Habitat
opened its own ReStore in 2001, netting only $1,200 in income the first year. But last year, the Atlanta ReStore netted the organization $435,000.
“This is an entrepreneurial approach for how we can help ourselves,” Martin said. “The donor gets a tax write off. The buyer gets a great deal. Habitat gets new revenues. And then the huge winner is that we have saved more than 4,500 tons going to landfills in our decade of work.”
Atlanta Habitat expects to be in its new home by mid-2014.
The Joseph B. Whitehead Foundation, part of the same family of foundations as the Woodruff Foundation, recently awarded Atlanta Habitat $3 million to renovate its new headquarters and to help build the new, expanded ReStore. In all, the local affiliate has already raised $6.6 million toward its goal.
Both the Woodruff and Whitehead foundation gifts are aimed at bolstering the ReStore model — locally and nationally.
“Habitat hopes there might be a $1 billion opportunity for affiliates around the world for this ReStore concept,” said Russ Hardin, president of the both the Woodruff and Whitehead foundations. “Habitat has a chance to develop a revenue stream to build what could be a national or an international brand.”
The ReStore concept began about 20 years ago — one in Austin, Texas, and the other in Winnipeg, Manitoba.
As of July 2012, there were 776 ReStores in North America generating a total of $266 million in gross revenue and $82 million in net income for that fiscal year.
That was a 19 percent increase in gross revenue and a 9 percent increase in net income over the year before.
“We want to run the existing stores better, and we want to build new stores,” said Jonathan Reckford, CEO of Habitat for Humanity International. “We see the potential to significantly increase ReStore sales. The stores are an underleveraged asset, and a lot of stores aren’t being managed effectively.”
Gluth said the Atlanta region will be a pilot market for ReStore by working with the six affiliates in metro Atlanta and marketing them collectively. There are three ReStore’s currently in the metro region, and the plan is to open at least four more in the next two years.
“We’ve got this collection of stores in a metro area,” Gluth said. “We want to know how closely will they work together; what is the market penetration strategy. We want to know what we can do to work collectively and collaboratively in the metro area.”
Ultimately, Gluth believes a “fully-developed” Atlanta market could have as many as 10 to 15 ReStores; and that the Atlanta model could be replicated across the country.
“We are just ramping up,” Gluth said. “It’s incredibly gratifying for me to be able to use experiences from my past to be able to make a difference going forward for Habitat International.”