Blogger: Janet Kobobel Grant
Last week the Family Christian Store (FCS) chain announced it was filing for Chapter 11 bankruptcy protection. In the press release, the chain stated that no stores would close and no employees (they have approximately 4,000) would lose their jobs. (You can read the press release here.)
To put this declaration in perspective, Christianity Today noted that “with 266 stores in 36 states, FCS is the nation’s largest chain of Christian stores as measured by locations, not sales. (For comparison, LifeWay Christian Resources has 185 stores in 29 states.) In 2014, FCS generated $216 million in gross revenues, notes Randall G. Reese at Chapter 11 Cases.”
If that cheery bit of news about no stores being shuttered and all employees remaining in place makes you wonder what’s so awful about bankruptcy, join me on a stroll down a virtual FCS’s aisle for a closer look at what affect such a decision has on the industry. (By the way, I don’t claim to be an attorney nor an accountant, and I’ve never experienced bankruptcy myself so others who have greater expertise should feel free to use the comments section to chime in.)
In a video produced for customers, CEO Chuck Bengochea states, “Our customers will not see any change in operations during this process. After the court approves the sale, we can begin to reinvest in our stores and bring our customers products and services that will help us better fulfill our mission—to glorify God by helping people find, grow, share and celebrate their faith in Christ.”
Filing for Chapter 11 results in FCS wiping out its debt and starting over. According to Publishers Weekly, “Publishers are on the hook for millions of dollars led by HarperCollins Christian Publishing which is owed $7.5 million. Other publishers owed large sums include Tyndale House ($1.7 million), B&H Publishing Group ($516,414), Faithwords ($537,374), and Barbour Publishing ($572,002). Ingram’s Spring Arbor distribution arm is owed $689,533.”
Now, if you were running a publishing house and found FCS not planning to pay you what you’re owed, what would you do? The publishers will, of course, ask the courts for the money, but if FCS had the money, it wouldn’t be declaring Chapter 11. So a likely response from the publishers will be to be even less risk averse in what they publish–and in how much they are willing to pay when negotiating new author contracts. We all would respond the same way if we had performed a service for someone and then discovered the payment would not be coming; we would tighten our purse strings.
Another likely affect is that FCS will return substantial amounts of product to the publishers. That will result in fewer sales for authors and less royalties.
The good news is this isn’t like Borders’ situation in which the stores sold everything at slashed prices, including the shelves, and left many communities with no bookstore.
Here is the two-month plan that FCS has outlined:
“Through a newly formed subsidiary, Family Christian Ministries will serve as the lead bidder for the Section 363 sale process, putting forward a plan that acquires the streamlined organization’s assets and maintains operation of the chain’s 267 stores in 36 states, as well as its e-commerce site www.familychristian.com. Family Christian Stores is asking the court for a schedule to complete the sale process in about 60 days.
“After the judge approves the sale, we’ll be immediately cash-flow positive and profitable. This process is similar to the one taken by the automobile and airline industries in recent years. We see this as the start of a fresh new day for Family Christian Stores and look forward to delighting our customers for many years to come.
“Among our next steps are to make various capital improvements to our stores, as well as invest in an expanded product line and implement a new retail strategy that will enable us to better serve our customers.”
Of course, once you enter into Chapter 11, the court has to approve your plans before you can act on them. And the court has started to ask FCS a lot of questions.
In Publishers Lunch 2/20/15 issue included this report: “There was no hiding the suspicious reorganization strategy being pursued by Family Christian Stores in a bankruptcy court hearing earlier this week. Family Christian Ministries has proposed selling the stores from one FCM subsidiary to another, new subsidiary. No other changes are proposed across the 266 stores and roughly 4,000 employees; the sole point of the reorganization is to clean out their creditors and start all over again….
“The filing included a proposed stalking horse bid of $73.8 million for an auction in April. That bid only comprises $28 million in cash–along with the assumption of almost $44 million in leases, and operating liabilities (gift cards, employee obligations, etc.) of $2 million. That’s not enough money to cover the secured lenders–a $34 million term loan owed to Credit Suisse, and about $23 million in revolving debt. So it would leave the roughly $40 million owed to trade suppliers and vendors as a complete writeoff.”
In the meantime, I’m unclear about what happens with current inventory in the stores. It seems as though FCB plans to take a fresh approach as to what product it will carry (fewer books? more books?). Nor do we know how publishers will respond to FCS’s orders once it revamps its stores’ image. Would you be eager to do business with FCB? How would you decide just how much credit to extend to a chain that survived by not paying what it owed you?
I realize this isn’t the cheeriest of subjects for us to ponder, but as participants in the publishing industry, it’s important for us to consider what happens to the industry when a bookstore declares Chapter 11.
Do you have a Family Christian Store in your community? What affect would its demise have on you? Was your community affected by Borders’ closing?
What affect does a bookstore declaring bankruptcy have on the publishing industry? Click to tweet.
Why writers should care when a bookstore files for bankruptcy. Click to tweet.
Photo by Stuart Miles, from FreeDigitalPhotos.net.
Losing Borders did hurt – we had three in ABQ, and they offered a nice alternative to Barnes and Noble, in that their selection was usually a bit more eclectic.
We’d often take a Sunday out, and go to either Borders or Barnes and Noble…make a day of it. They were different experiences.
We never spent much time at Family Christian – generally Barbara preferred to patronize the smaller independent Christian stores, or church-connected book/gift shops.
On bankruptcy…after my academic career ended (with massive medical bills), and illness precluded finding either another teaching or an engineering job, we had to go through Chapter 7, which was full liquidation of debts…and assets, up to a certain point (we didn’t HAVE any, at that point…save one, described below). Barbara’s job provided enough income to allow us to keep the house and the car, and that was the basis we really needed.
It was a salient lesson in buying less house, and less car, than you think you can afford. I married a smart lady.
It wasn’t an unpleasant process; we had a good lawyer who made it relatively easy, and the one hearing was conducted with grace and sympathy.
I suppose I should say it was humiliating, but the intervening time has brought enough challenges that I really don’t care. I went bankrupt. Big deal. Worse things happen to better people.
The interesting thing, from a writer’s perspective, is that I had a book in print at the time – a subsidy publisher had given me a straight royalty contract on “Blessed Are The Pure Of Heart”, which they’d seen when I SP’d it under a different title…and they liked it.
When it it came to ‘assets’, it might have been sold off, but none of the creditors was interested, so I retained the rights.
I did learn that it was important to me, and that a first-published-book is not a mere commodity. I would have lost a part of myself, had it gone. I had considered myself a hardcase when it came to writing, but self-delusion can be quite easily pierced.
It may be of interest that Richard Bach went through bankruptcy, and described what it did to his writing life in “The Bridge Across Forever”. He did lose the rights to his books…and worked hard to eventually buy them back. He didn’t want to abandon his Paper Children.
I can relate.
Janet (or anyone who might have a thought), here), I have a question.
I suspect that I was able to keep “Blessed Are The Pure Of Heart” is because it was recognized that under the current paradigm, the author is a vital part of the marketing team…and that an author would not work to publicize a book to which he no longer held the rights.
The trustee probably realized this, and passed on dealing with BPH.
(This opens the question…would you work on brand identification if someone else held the rights to your earlier work? or would you try to ‘reinvent’ your brand?)
Andrew, thanks for your perspective from someone who faced bankruptcy. I’m sure your case was viewed with sympathy; you weren’t someone who had spent himself into a hole he couldn’t get out. You lost your ability to earn the kind of income you had when you were healthy.
I would think Richard Bach would work hard to keep his brand going, even though the income for his earlier books wouldn’t be his. But he was such an established author, it wouldn’t make sense to switch how he wanted readers to think of him.
I’m so sorry to hear that. Thank you for that information. It’s even more of a wake-up call to pray. And Andrew, thank you for sharing your experience.
It is such a rough time for bookstores. I was sorry to hear about FCS, but I am not surprised. As a Christian school librarian, I did some shopping there (and got a lot of free library books through their perks programs). About 2 years ago I walked in to discover that the main book area had been cut back by more than half and the area filled with porcelain figurines and the like (sorry if I offend anybody, but I really dislike all that little cutesy Christian stuff). The music department had been completely removed. I am not sure that was a wise move, but I understood that online sales were taking a bite out of the brick and mortar.
If I understand correctly, FCS no longer operates as a for-profit, but generates funds for its non-profit Family Christian Ministries which operates orphanages in China and Haiti and also sponsors children through World Vision.
BTW – FCS is in Grand Rapids and Borders was HQed in Ann Arbor, so these companies are my neighbors. I loved hanging out in the flagship stores for both – especially Borders.
Today’s Steve Laube blog does a nice job of explaining the ramifications to authors and publishers. Even I could understand it! http://www.stevelaube.com/blog/
Sheila, I had heard reports of dissatisfaction with FCS’s in-store product as well. The managers had little to no control over what they carried, and they seem to have had little incentive to create a warm and welcoming atmosphere in the stores.
I used to work for a Bankruptcy Trustee, although most of my responsiblities were in immigration law, his other area of focus. Many, many cases were open and shut, like Andrew’s. They had nothing, so they could pay nothing. My heart went out to the people in those circumstances. But sometimes, assets were hidden or questionable organizations were involved. Greed and deception abounded. Then, the investigations were fascinating. You’ve brought back some memories for me today, Janet.
I agree that selling the assets to another subsidiary is suspicious. It’ll be interesting to see what the court (actually, the hard-working trustee) discovers. I agree that it’s definitely a concern for publishers and authors, and my prayers go with those who will have to face some consequences for others’ decisions. I also can’t help but wonder how The World will perceive this. In her blog on Friday, Rachel wrote, “There’s a lot of badmouthing going on in Christian publishing.” I’m definitely not saying that’s what’s going on here! And we don’t know the details involved, so I’m not saying there’s any funny business in the declaration of bankruptcy. But some are quick to villify Christians and Christian business (an oxymoron, they say), and I pray The World doesn’t somehow tie this to Christian faith in general. Thank you for keeping us up to date.
Meghan, thanks for speaking to what you’ve seen of bankruptcy proceedings. If FCS has been “creative” in how it structured itself when it became a nonprofit, or in how it’s proposing to get out of bankruptcy, the World will, indeed, paint us with the same brush as FCS.
I frequent Mardel and Lifeway more frequently than I do FCS. As Sheila mentioned, the last time I went into FCS I noticed more knick-knacks and fewer books. Hate to hear this though!
I think that one of the things we may have to accept, to help ensure the survival of Family Christian and other such emporia, is that “Christianity” is a lifestyle, and includes things like
* Precious Moments knicknacks
* Thomas Kinkaid prints
* Message t-shirts
* And…oh, yes…books
We’re Christian readers, yes, but the ‘reading’ part of the population is small in any event (I’ve heard it quoted that 85% of people do NOT read for pleasure). If we hold to the hope that FCS is here to serve us, as their primary function, we’ll kill the chain.
Does this mean I would go in and buy some truly appalling figurines?
No, but if I want some Christian apologia, I’ll sooner have FCS order it for me, rather than buy online or at a secular bookstore. it may cost more, but I think we all have to do our bit in helping them survive.
(Janet, is “emporia”, as plural of emporium, really a word? or have I just added to the dictionary?)
Jennifer is fortunate in that she apparently has some excellent bookstore options she can shop at. If you’re going to the store to look at books, you’ll go to the store that has the best selection.
And, Andrew, my dictionary tells me the plural for “emporium” could be “emporiums” or “emporia.”
There is an FCS in Asheville, NC. But as I live west of the city and it’s on the eastern side of the city, I don’t go to it very often. (I’m on that side of town twice a week, but FCS is often closed/closing by the time my commitments come to an end for the day.) Losing it wouldn’t affect me too much; Asheville does have a Lifeway and at least one locally-owned Christian bookstore.
When the local Waldenbooks closed, a year and a half before Borders went belly-up, I lost my job. That was my favorite job. I LOVED working there. I’ve applied to other bookstores (including B&N), but no luck yet.
Lura, your loss of your job is one of the saddest effects of a bookstore closing. Thanks for reminding us of that potential outcome with FCS.
Growing up when and where I did, I sort of assumed that capitalism, the protestant work ethic, the American way and Christianity were entwined. As I matured, I’ve come to understand that God doesn’t always run his economy the way the world does. Even if there is nothing illegal or unethical in the FCS story, it carries an aura of unrighteousness.
On a personal note, I sometimes wonder if the goal is to profit from my writing, or if God’s plan for me is to make it freely and publically available. I understand that “the worker is worthy of his hire” (I’m married to a minister); but I write devotions, Bible studies and other non-fiction and see God as the source of my inspiration–when might the desire for profit get in the way of the message? Sometimes I write about obeying God and trusting his provision. Maybe I’m writing to myself.
Shirlee, for what it may be worth, I have found that things I have given away were valued thus by their recipients…in most cases.
It’s disappointing, I guess. I’ve given away good stuff…only to see it trashed.
Maybe we really appreciate that for which we have to pay, in one way or another, and putting a profit motive on your writing simply puts potential readers into the position of having to make a positive choice to hear your message.
I’ve also found that things given away (my paintings) were less valued than those that were sold. The only exceptions have been those paintings given as celebratory gifts (Christmas, Birthday, Wedding, etc.).
Obviously you don’t want “the desire for profit” to “get in the way of the message”, but don’t sell yourself short. You want people to pay attention to what you have to say. Words freely given are often freely ignored and discarded. It may seem wrong, but people really do put more value on things they’ve paid for.
Obviously we all value the wisdom freely given in this blog. Still, I’ll bet if Books & Such published a “Best of” collection, there would be plenty of buyers. Maybe that’s where platform comes in…
Elissa, we’ve thought about creating a “Best of” book, but the number of blogs we’ve written has such breadth it’s overwhelming to decide what to include and what to exclude. We even came up with structure for the book, a title, etc. But, well, the return on that immense investment was unlikely to make business sense. Which is something we all have to weigh as we decide what we’re putting our creative energy into.
We had a Borders store in the vicinity. A Barnes and Noble was closer and more convenient for access, so I rarely went to the Borders. I haven’t seen much effect on the community.
We have a Lifeway in the area, which I go to about four times a year, sometimes buying something, sometimes looking. We also had another Christian bookstore that I went to more frequently, but it closed several years ago. I don’t think it was an FCS. It’s closing left Lifeway as the only Christian in town, at least for a 25 mile radius from where I live.
David, you had a lot of choices to start out with–four. But now you’re down to two. That’s the story of most towns.
Jennifer Zarifeh Major
We don’t have FCS here in Canada, and where I live, there’s only one Christian bookstore in town, but it’s well supported and “fully loaded” with product. When there were two Christian bookstores, I usually spent my money at the smaller one, just to support it. Sadly, it closed because not enough people did so.
One thing I’ve noticed about a successful Christian bookstore near me is that they have adopted a sort of unique attitude.
A large part of their revenue comes from musical instruments and instruction, but they also maintain a selection of Muslim, Hindu, Sikh and Buddhist literature.
People from other faiths are specifically made to feel welcome, and while it is a firmly Christian environment, there is no pressure. You can buy a Qu’ran there, and the owner will happily talk about some of the more difficult Suras. And he’s read the Guru Granth Sahib, so a wandering Sikh will feel happy about buying a cup of very good coffee, and shooting the breeze.
I suspect he’s led more people to Jesus that I have.
Kristen Joy Wilks
That is very very interesting. Something to ponder.
Kristen Joy Wilks
We never had a Borders or a Barns & Noble, I buy e-books for my Nook there though. We have one small locally owned Christian book store that keeps closing and then opening again. It is about 45 minutes away from us though. There is a really cute locally owned book store in a coffee shot about 25 minutes away and I just order books for my boys and they ship them in for me and then I go and pick them up. Works great. I get books to bribe my children with each month (If I see you being kind…you might get a free book!) And I get to give my business locally. So, this won’t affect me at all in a direct way. But it is really sad to see this happen. I’m sure as a writer this will change things as I’m trying to sell manuscripts. Once in awhile you will hear about how so and so millionaire went bankrupt 3 time before they had their big break. It is supposed to be inspiring, but I’ve always wondered if they went back and paid the people they owed. A tough thing, this.
Kristen Joy Wilks
Um…that would be coffee shop. Wow, that would be a small book store.
For what it’s worth, when I dethrone J.K Rowling, I will go to the people to whom I owed money, and I will pay it back, with interest.
Bankruptcy made it possible for me to survive, and save the dogs in my care, but I have an obligation.
They may have written it off as an uncollectable debt; no matter. I will repay them.
Janet Ann Collins
If the closing bookstores don’t pay publishers for their inventory (and Steve Laube’s blogs suggests they may not) it will harm the Christian publishers. I hope that doesn’t happen.
I moved to a small town in the California foothills ten years ago and there were quite a few bookstores here. Now the Christian ones have all closed and, except for some second hand ones, there’s only one bookstore left in town, but they do carry some Christian books. Maybe if the economy improves more will open, but most people are used to buying books online.
Janet, Steve’s blog was excellent in spelling out where the bankruptcy proceedings currently are. I would agree with him that it’s highly unlikely FCS will pay the publishers for current inventory FCS has. We just don’t know that for sure at this point. I would expect that publishers are tightening their belts in preparation for that announcement.
Daphne Michele Self
I understand how horrid is it not to pay back debts, but then as Christians we should forgive. FCS could have went the way of Borders (which I had worked for years past) and closed down. Instead, they are working on the only feasible act to ensure that they can provide Christian products for customers.
They may have to be more fickle when choosing products, which would make publishers more determined to pitch the books. No more stocking on name only. Now publishers would have to work to gain books into a store.
In my view, FCS is doing what it can to stay in business. I don’t care to know the intimate details of their financial status or why it came down to this. The big publishing companies can take the hit. It will make them pay attention to what they are publishing and make them work harder…just as the smaller houses.
It’s a tough economy and I think they are doing everything they can to stay afloat and not file all out bankruptcy.
I’ll stand beside them in their decision. There’s always more to the story and people may conjure reasons, excuses, and ideas, but FSC is doing what they believe is right to keep not only stores operational for the benefit of many.
Daphne, I totally agree that having FCS file for Chapter 11 as opposed to outright bankruptcy is in everyone’s interests–FCS, readers, publishers, and authors. But we shouldn’t pretend Chapter 11 won’t have a chilling affect on Christian publishing. It most certainly will. We might not like to consider the whys and wherefores of FCS’s decisions, but I don’t believe in remaining uninformed. I don’t have a prurient interest; I have self-interest.
Janet, when the news about FCS broke a couple weeks ago, was that the first anyone knew about it? I would assume that the publishers owed so much must have started suspecting, but was the release of the CEO’s video the first anyone else in the industry knew of it? I really feel for the many–publishers & staff, authors, agents–who might lose income due to this. Had to be such a shock.
Sally, as far as I know, publishers had no previous knowledge of FCS’s filing. They must have had plenty of reasons to be suspect, but when a company near declaring bankruptcy, they try to keep their credit alive until the last possible moment.
I would think that the publishers could place FCS on a very tight credit situation or even a cash-and-carry policy. As far as inventory goes, it would need to be paid for or the publishers should have the right to collect their products.
No matter the situation, any bookstore doing this only effects other businesses and the entire book world negatively. I hope that FCS will be able to work their way back to prosperity.
Randy, since FCS had an arrangement with publishers in which they didn’t pay for the books they stocked until those books sold, FCS could ship all the inventory back to publishers, resulting in massive returns for publishers to absorb. Going forward, the publishers will have to decide what sort of arrangements to make with FCS. Obviously publishers can’t ignore the opportunity to place their product in the largest Christian chain, but how to do so in a way that minimizes potential loss is quite the trick.
Janet, that’s interesting publishers don’t collect money there until books are sold. I’m sure they’ll be able to continue doing business together in a way that works.
Bonnie S. Calhoun
From Steve Laube’s latest post FCS owes more than $40 million in unpaid receivables (due to publishers and vendors) which is an unsecured debt. It is being assumed that none of these bills will be paid.
Like with the notice by Barbour on the 19th that they are laying people off because of the FCS thing, I think this is going to have an unfortunate tsunami effect across all of Christian publishing that is going to be hard to recover from, and it may form another impetus for authors to go indie.
For those who aren’t aware, Barbour Publishing announced that they will cut staff and make other adjustments to their publishing program in part due to the debt that FCS is unlikely to pay to the publishers. The first of many repercussions we’ll see–and some of them we’ll never know for sure were due to FCS’s situation.
Our CRS forced out our local independent a few years back and then closed several months ago. It was the worst store to shop in between no one remembering any customers, trying to force customers to sponsor a child (to get their kickback) and treating authors terribly.Many of my friends stopped shopping there long before it closed. I am praying that things will turn around. The post on Steve Laube’s blog today reminds us that God is in control and gets us through the storms.
Karen, all reports I’ve heard, which are, of course, subjective, have indicated that little was done to provide good customer service. I think even those of us not in the business of running a store know that for a bookstore to succeed, its service must be superb.