Reinvention Reigns with Derek Cha

When Derek Cha came to Richmond in 2009, his life as a businessman and the family breadwinner came close to catastrophe.

More than two decades earlier, the Korean-American had started two framing businesses, Art and Frame Depot and Art and Frame Warehouse, which grew into a large chain of 80 stores nationwide. He was a wealthy man, with a home in Potomac, Md., one of the most affluent communities in the United States. But as the housing market began to tank in 2006, followed soon after by the entire U.S. economy, so did his good fortune. "There was no end in sight," the 46-year-old says now. "Our business kaputted."

By 2009, only a handful of the 80 stores were still open, and none were providing income for Cha; his wife, Annah Kim; and their two young children. He no longer could afford to pay the mortgage on his house, and in 2009, one year after the 2008 financial crash, he gave up, renting it out to another couple with the intention of moving to Richmond to start over in an artsy and less expensive place. He planned to open a new framing store in West Broad Village.

"We were on the brink of bankruptcy, and all I knew was the framing and art-gallery business," Cha says. "My finances were in ruins, and it was the only business I knew. But before we were going to open, my wife said, ‘This is not the right time. We've got to do something else.' "

So the once-affluent businessman turned himself into a courier, using his car as his delivery truck. "I delivered medicines to nursing homes at night. I picked up documents, stuff from the airport, during the day." And he and his wife prayed. "We turned to God, and we prayed day and night for a new business venture that would thrive in this economy."

Six months later, Cha re-invented himself yet again, this time becoming rapidly successful in an entirely different kind of business — a frozen-yogurt chain that he named SweetFrog. He expects the chain to have 50 stores by the spring of 2012.

This kind of reinvention is what many people have done — though most at a slower pace and on a smaller scale — to survive during an unsteady economic recovery that has once again become painfully slow.

In the first months of 2011, well-paying jobs started to come back to the Richmond region, and homes that had been on the market for months, even years, began to sell, albeit at low prices. National and regional economic analysts were happily predicting an almost certain economic comeback. Then came the triple whammy of the Libya conflict, which sent oil prices upward; the tsunami-induced paralysis of Japan; and worries about a European debt crisis.

Although the Richmond region, typically, is still doing better than most in the nation, manufacturing and retail sales slipped while employment and home sales were unsteady or flat by midsummer. Now recovery feels glacially paced, like no recovery at all for some people, and many have gone into coping mode.

For Cha, that's meant figuring out how to do well in a poor economy. For other people, it's meant becoming newly frugal — replacing living alone with sharing houses or apartments, replacing high-end mall shopping with consignment-store cherry-picking, and replacing full-time jobs with selling their last resources, their own time and skills.

In the worst of economic times, "People do whatever they have to do to put food on the table," says Oleg Korenok, an economist at Virginia Commonwealth University. "They find new things to do. And sometimes they win."

Korenok says that generally when a recession is caused by the collapse of financial institutions — as this one and the Great Depression were — recovery is slower because people have to pay back debt before they begin to spend. Still, he says, there's no reason to believe that the United States won't heal. The two engines of contemporary economies are capital and technology, and the United States has enough of both, he says.

The Internet is a study in adaptation to hard times, and Craigslist, in particular, reflects the wide swath of financial distress cut by the long way back to economic health. At craigslist.org, myriad ads on any given day for users in the Richmond region manifest the worries of people trying to dig their way out of deep holes:

"My licensed handyman/contractor services for your help with my Dominion bill," reads one recent posting. The man adds, "You don't have to pay me, you can call Dominion and pay them." He posts Dominion's toll-free number, his account number and this message: "Not looking for handouts … will be forever grateful for your generosity."

In another ad, Frank Lou, from central New Jersey, offers to swap his Lynchburg, Va., house. In response to an email request to include his situation in this story, he writes back that he couldn't find either a buyer or a renter for his luxurious, 4,000-square-foot home, which is assessed, he says, at more than $500,000. Now he's trying to trade it for a Richmond house, since this is where he's decided to retire.

A third recent ad reads, "help me help u (get you where you want to go) I'm Jes, a 28 f personal driver … safe and dependable. PLEASE NO KILLERS."

The ad includes a phone number, and Jes Riley turns out to be as darkly funny in her conversation as she is in her posting. "You're writing about ‘people adapting to hard times?' " she says, voice dripping with irony. "Well, I'm definitely an example of that."

Riley explains that she left what she described as a dead-end driving job with a delivery service in June 2010 only to find that she couldn't replace it. After looking in vain for just about anything — bartending, waitressing, working behind the counter at Hardee's — she left her two children with her mother; unable to help with bills because she had no income, she decided to hire herself out as a driver, reasoning that she could make money while helping people who didn't have even the little she had — a car. Instead, she learned a hard lesson about the human condition: People desperate for help often are the most difficult to help.

"Needy people have a lot of drama going on in their lives," she says, "and you get pulled down with them." Her steady client, a woman, paid Riley for the few first weeks of driving service. Then in mid-June of this year, just before the client was supposed to make a second payment, she called at 4 a.m. on a weekday, explaining that she'd been arrested and needed to use the money she owed Riley to put up bond. Fortunately, Riley says, she got work that same week as an independent contractor for C.M. Delivery, a Richmond-based auto-parts delivery service, and she's no longer in the personal driving business.

Other websites reflect less financial desperation than imaginative frugality, creative bartering through online forums for giving away old stuff to get new stuff, for collecting coupons you don't need and exchanging them for ones you do need. In the Richmond region, RichmondBargains.com connects vendors offering deals and coupons with people who need to save. And a local version of the many online clothes-swapping organizations has become highly popular, according to Joanne Rae, one of the organizers of a group dubbed the Association of Image Consultants International.

The twice-yearly swaps are several cuts above high-end yard sales. Though membership costs only $25 per person, the swap, which drew 50 women last April, takes place in one of Richmond's private country clubs, Westwood. Well in advance, members are expected to donate handbags, clothes, shoes and jewelry that are new or barely used. Rae collects the goods, often name brands — Banana Republic, Coach, Frye, Diane Von Furstenberg, Ann Taylor.

On the day of the swap, Rae and her helpers arrange the items artfully, hanging carefully pressed clothes and putting up curtains in front of a wall-length mirror to create dressing rooms. There are strict rules: If you bring five items, you can take five; if you bring 20, you can take 20. Rae says that the women love the social aspect, the trading of tips and opinions about what looks good on whom. They don't openly acknowledge that a new frugality has crept into their well-appointed lives.

"But there's a huge economic aspect," she says. When it's time for the actual swapping, "women run to the racks to get the items they want. It's like Filene's Basement."

An unemployment-induced entrepreneurial zeitgeist is familiar to Barb Upchurch, director of the women's business center for New Visions, New Ventures, which provides training for startup business owners. Although unemployment has continued to decline, reaching a low of 8.1 percent in the metro region in May, according to the Federal Reserve Bank of Richmond, there are still lots of people who haven't been able to find jobs — or at least not good ones. The innovative and gutsy among them turn what could have been an emotional and financial bottom into an opportunity to do what they've wanted to do for years — start their own business, she says.

Upchurch can rattle off cases in point: Victoria DeRoche, for example, who started a pizza-kit business — Pizza Tonight, featuring her homemade dough as well as sauce. Married with two children, the 43-year-old had been searching for a way to make money while searching for a job, and selling pizza kits seemed like a natural because of her highly popular pizza parties; she'd invite over friends, then make them pizza using her wood-fired oven. Once she started the business in the summer of 2010, it became more time-consuming, rewarding and successful than she expected.

A year later, her pizza kits are sold at three farmers markets a week; through RelayFoods.com, an online delivery service for local food producers; via the co-op Fall Line Farms; and at shops. "I do depend on my husband's job, " says DeRoche, who employs two people. "But my business is growing. It's becoming something."

And then there's Tia Lanon, whose startup is as interesting as it is difficult to explain. She used to work as both an in-home social services counselor and as a technician in a lab that analyzed DNA samples. As the part-time paternity coordinator for the lab, Lanon swabbed mouths for DNA-laced saliva that would then be used as proof of paternity or biological relationships between people.

She says, "I fell in love with the people and their stories" — mothers determined to prove that their sons did not father the children that their girlfriends say they did; fathers trying to prove that they did; and many, many immigrants, particularly Ghanaians, Haitians, Ethiopians and El Salvadorans. (If they want to bring people from back home to the United States, the immigrants already here must prove they are related; hence, the DNA sampling.)

After getting laid off from her counseling job, Lanon decided to strike out on her own. Having noticed that many people preferred not to come to the lab for the swabbing, she got a business license to provide a mobile service. She goes to her clients, in their homes or their offices, and swabs their mouths there. "I don't think anyone else is doing a mobile service," she says excitedly. "My business is already steady, and I think it will increase."

Cha, too, describes his financial bottom as an opportunity in disguise. In desperation, he says, his family turned to prayer, which generated a simple but marketable idea. The build-your-own frozen-yogurt places that Cha had seen in California were, as far as he could tell, nowhere to be found on the East Coast. The product was good, inexpensive, child-friendly and fun. (You start at the back of the shop with a Styrofoam carton. You pump it full of one of 14 flavors of soft frozen yogurt, then you mix in one or more of 50 toppings.)

The couple didn't have enough cash for startup costs, but while looking for a place to open the shop, they found a generous and business-minded landlord. He gave Cha "tenant improvement" funds equalling $70,000 which allowed the couple to open their first shop in the landlord's property. The first two SweetFrogs opened in 2010 in Short Pump and Carytown. "The concept has been around, but I made it better," Cha says. "We make our own yogurt in-house, and we also use the best ingredients."

A year later, Virginians have bought into the concept, opening SweetFrog shops at a brisk pace all over the Richmond region, in Chester and Chesterfield, Westchester Commons, Mechanicsville, and elsewhere in Virginia, including Lynchburg, Charlottesville, Fairfax, Williamsburg, and Virginia Beach. He expects to open stores in other states so that by 2020, there will be 1,000 SweetFrogs nationwide. And for each one, Cha makes $25,000 up front and 4 percent of sales thereafter. He's almost certainly going to be prosperous again.

"Our financial disaster was a chance to get out of the comfort zone," Cha says now. "And that's the time to get out and rely on God. The name for the business also came to us through prayer. We named it SweetFrog, for ‘Fully Rely on God.' "

Jeffrey Pollack, assistant professor at the University of Richmond's Robins School of Business, makes the same point, but in the language of an academic.

"The data is strong that when unemployment increases so does self-employment, sometimes real entrepreneurship," he says. "When the opposition is gone — where there's nothing left to lose, people start their own businesses."