What's going on with Family Christian Stores?
I’ve had a number of people write to ask about the bankruptcy of Family Christian Stores, and specifically if it will affect writers who publish in CBA. A bit of background: FCS has 266 stores, did $230M in business last year, and were the largest purveyor of religious books, bibles, t-shirts, and inspirational ephemera in the country. They were originally part of Zondervan, but were bought out by Richard Jackson (remember that name — it will come up often) and his partners a few years ago. Jackson and his buddies said they were going to use the stores to sell products, make money, and use the profits to fund other ministries around the world. Certainly a noble idea. The only problem? They didn’t know what they were doing.
Sales dropped. Bookselling turned into a tough business. Profits were slim. So a few weeks ago, the chain filed for Chapter 11, a reorganization bankruptcy. They have huge debts — close to $127M. They owe $7M to HarperCollins alone, largely for bibles, which is an expensive (and lucrative) business. They owe another $2M to Tyndale, and a half million each to Baker, B&H, Harvest House, Crossway, Barbour, Presbyterian & Reformed, etc. Their debts to publishers total roughly $14M. They owe greeting card and gift companies about another $13M.
In the world of Wall Street finance, that may not look like much. (Borders had nearly a thousand stores, and owed publishers much more.) But in the world of Christian publishing, this is huge. Imagine you’re Harvest House — a very well run, medium-sized publishing house that is privately owned, and trying to compete with the Random Houses and Simon & Schusters of the world. If a giant corporation is suddenly told they won’t be paid a half million dollars, you can bet they won’t be happy, but they’ll weather the storm because they have the financial resources to get through the rough patches. But Harvest House? A half million dollar hit is awfully painful. It can mean mean people lose their jobs (and no, I don’t have any insider information on Harvest House — I’m simply using them as an example). At a small house like P&R, a half million dollar loss can spell disaster.
What does that mean for authors? It certainly means fewer places to sell your books, and possibly fewer companies to approach with your manuscript. In the immediate, it means that all those books your publisher sent to the various Family Christian Stores won’t be making you any money, since FCS won’t be paying your publisher for them, and they’ll likely have to write them off. (The total debt for “unsecured receivables,” which means books and stuff they took in but haven’t paid for, is about $40M — the rest of the debts are in leases and equipment, presumably. So they have $40M in product that likely won’t be paid for.)
Worse, FCS began offering consignment sales a couple years ago. It worked this way: If you have, say, a jewelry company that you run out of your garage, they’ll take a bunch of your jewelry and put it on display in their stores, but will only pay you if the jewelry actually sells. So it’s on consignment, and you’re trusting FCS to display and sell your products, then track and pay you the money. But if they suddenly shut down, you get nothing — and you don’t get your product back, either. FCS got into consignments in a big way, since they were a means of making money with nothing down. I’ve seen reports that they had nearly $20M in consignment products (and, as usual with a Chapter 11 bankruptcy, the numbers can sometimes be convoluted)… which means little mom-and-pop operations who sent them products are just out of luck. THAT will shut down small businesses, since you can bet when it’s time to divvy up the proceeds, the big banks will get paid first and there won’t be anything left over by the time it gets to the small creditors.
One of the real concerns here is that Family Christian Stores apparently was still ordering more books and taking in new consignments, even when they had to have known they were not going to be able to pay for them. That’s the point where people stop wondering if they were done in by a difficult retail environment, and start wondering if they were simply unethical, or even possibly corrupt.
So Richard Jackson, the guy who bought the company a few years ago? He’s put together another company, and wants to buy FCS. (You read that right — the guy who owns it wants to sell it to himself.) But, of course, he only wants to pay a fraction of what is owed — $28M in cash, and he’ll assume the leases. And who is in line to get paid? Um… one of the creditors is Richard Jackson. Yes. The guy who owns the company, and who wants to buy the company from himself, also wants to be a creditor, so he gets paid before others. What a guy. I’m sure he’ll use the money to fund other great ministries!
Family Christian Stores has come out with a statement that says all their stores will re-open and all their employees will be retained. This is what public relations experts refer to as “spin,” and what the rest of us call a total, stinking pile of bull-pucky. I don’t know what Richard and his friends are smoking, but there’s no way on God’s green earth they keep all the stores open, and even their employees have laughed off the claim that everyone will keep their jobs. And what do you think the folks at Harvest House are going to say when Richard and Buddies call them to order more books?
So, yeah… this is a disaster. For readers, for publishers, and for authors working in CBA.
UPDATE: So Richard Jackson and his friends have indeed dropped their plan to buy out their own company and therefore cheat publishers out of millions of dollars. They faced a lot of criticism as word got out about their plans, and this week a hearing was held that had the current owners, publishers, and lawyers representing the various businesses negotiating for a settlement. A judge set a May 21 auction date for Family Christian Stores, the winning bid will be announced the next day, and the sale must close by early June. What does this mean? It means that either some companies will get together, buy FCS out, and keep some of the stores open, or everything will go into the hands of a wholesaler that will slash prices and sell all the stock, displays, and fixtures in order to close them out. Either way, there’s going to be far fewer selling opportunities for CBA authors.
59 Comments
I find it terrible that one of the people they owe is a child sponsorship agency. FC was paid every time a child was sponsored by a customer. However FC still owes this agency money. And no Jackson did not give the company away when he bought it with two other businessmen. It’s also interesting to note that the current CEO is friends with the former CEO who resigned but yet still has a stake with him working now for the I disciple app they push down everyone’s throats.
I feel this company has lost sight of their mission and is greedy and underhanded. They took on consignment merchandise knowing they were filing.
The way they threaten their employees with job loss for not getting this or that sold is sad. And they never said they would keep all the stores open they said they hoped to. And when they have to close half they will use the excuse “well it’s in Gods will” disgusted with this company!
I knew God would save our company. I knew it. Yeah for FCS! Happy!
thank you for your compassion. But we are not worried and assured God will
prevail and we will ALL be employed at FCS! Every single one of us!
How do you think those who work for them feel? I have to be concerned for their partners (sales associates) who are watching this unfold VERY closely. They are not sure if their jobs are secure, or if they should be looking for new employment 🙁 Nothing has really been shared with them.
I work at FCS. We have frequent Corp. calls giving us updates, and most of us also look for information online as well. So we are not uninformed. I am concerned about our vendors and authors and the effect this is having on Christian publishing. I pray that there will be a way to pay them.
We were happy to get a new CEO, Chuck, about a year ago, but I am not sure he knew the total picture when he came on board. He has a good record with his previous co. He has made positive changes inside our stores. I hope whoever buys us, keeps him.
I do not think Mr. Jackson has benefited financially from his FCS purchase. He paid millions for the co. & immediately made us non-profit so he knew he would never make money from us. He later gave us a loan to keep us going. I believe that is why he is paid first – because he is a major lender with a secured loan , but I could be wrong.
The biggest concern any of us have is remaining a Christian company. paying back our vendors/authors, and continuing our missions, (no one has mentioned the orphanages, & other ministries that count on us.), and taking care of our employees.
I work for FCS as well, however our location is not as updated with what is going on 🙁 I am finding the information as it is released online, but we were advised at first that they were going to be as transparent as possible. Maybe within other channels such information is shared. My coworkers and I are just wondering if we have an outlook for the company past June, I guess it will come in time. The only reason I posted originally was everyone else is focused on the outer works of the company. I’m more concerned about the inner ones; the ministries that are being affected as well as the 3,100 people waiting on word of what’s occurring. I also wonder if we will continue as a Christian company, or if it will be changed!
All of us employees will have the last laugh when God triumphs and His Glory is shown when He saves our company. Can’t wait until Friday when the announcement is made!!!
I won’t be laughing Pat… I don’t know why you would. I’ve worked for FC for over seven years, and what is going on makes me sad and sick. When I found out how much we owed vendors I was ill the rest of the day. My heart breaks for the small vendors (and honestly the big ones too) that we are hurting.
Praying that the Lord’s will be done, there’s no way stores don’t close. I’m just hoping people get paid for what we have on our shelf.
I’m interested to see what happens Friday, honestly if things don’t change I probably will not stay with this company. We are called to be good stewards, and we have failed.
I am a store manager at FCS…This article is incorrect from the start. FCS was not a part of Zondervan when they were bought out. The Zondervan history is from years and years ago. The company was more recently owned by a private equity group known as Blackstone. (Until 2 years ago) The characterization by this guy who has no real knowledge is completely off base. Shame on you guys for believing it so freely. Jackson did not “buy” the company…a GROUP of men bought the company….AND GAVE IT AWAY…To Family Christian Ministries. (Jackson was just one of those people.) What Jackson did do was put up $25 MILLION of his OWN money via a secured loan (That is what he seeks to get back)….to Family Christian Ministries to try and help them recover…AFTER the team of owners had GIVEN the company away to the non-profit. (So partners including Jackson bought FCS from Backstone, and gifted it to a non-profit. To further help, Jackson took $25M of his own money to try and help FCS recover from years of bad choices under Blackstones ownership.
Facts are your friend.
What does the future hold? Who knows. But the past is quite different from this poorly crafted story.
You’re splitting hairs here. I didn’t say they bought it from Zondervan — I said “they were originally part of Zondervan.” They’ve been sold twice since then. And you make it sound as though Richard L Jackson wasn’t part of the group that bought the company, when in fact he was. They then changed the ownership. To say they “gave it away” is a misnomer. They reshuffled it and gave it a new name. Yes, Mr Jackson put $25M of his own money into the company, but he was investing in a business. Um… you have to put your own money in to buy a company — I put my own money in to start MacGregor Literary. That’s what buying a company is. And there’s nothing terribly heroic in that; it’s business. But you fail to mention he put the money up to help buy it, then wanted to buy it anew in a “stalking horse” purchase, and only backed off when the vendors all railed against that move (so apparently I’m not the only one who views Mr Jackson’s efforts with some skepticism). Still, he’s set to get paid back… AHEAD of the small businesses that filled the store shelves. So… um… maybe this isn’t nearly as heroic as you want to make it out.
As a manager, here are some questions for you: Will FCS be giving back the product they took in on consignment? Will they be paying publishers back for the books they ordered in? As a manager, did you order in any supplies to your store after you knew the company was in serious trouble and knew the businesses probably would not be paid back? Just wondering if you can help us with those facts…
Honestly, The secrecy is because we are told NOT to discuss…Great pains? Its the click of one button to post as a guest…but I can assure you I am just an SM…As for the $25M…that was ADDITIONAL…after the company was purchased and gifted. (At least that was my understanding) and by the way…I know what about starting a business. My wife and I own a small business as well.
I never acted like Mr. Jackson was not a part of the group…I specifically stated that he was.
No…we don’t order consignment post filing… Stores only order via the company special order system, and at the store level we don’t know what product is consignment and what is not. Most product comes directly via our corporate warehouse. Product is mixed together. As for right now the company is only operating on a cash basis. (court ordered…Its public record)
We are being told that private discussions are ongoing to pay back on good faith, even if the court does not require. BTW
I actually agree that the stalking horse bid was a bad idea. Even though, Mr. Jackson is a Godly man with no shots to his character on his record…It was probably a poor idea. We agree there
What this company needs right now though is prayer and consideration for the 3200 people who had nothing to do with this mess. As the book market started dying FCS was slow to react. As we move to more of a Hallmark/digital/Bible retailer (with a book presence as well) hopefully the future will be better. Perhaps not.
Be blessed.
Hmmm… Not to sound argumentative, SM, but it sure doesn’t sound like my original post was, in fact, filled with inaccuracies. Mr Jackson (who may be a great guy, as you suggest) did, in fact, loan money to his own company with the stipulation that he’ll be the first one paid back. Then he tried arrange to buy his own company for pennies on the dollar. Neither of those things make him look good. As for the consignment products, I’ve now talked with two people who both said their local stores took in products, knowing the company was in trouble. (And the Chapter 11 filing shows FCS owes those little companies millions.) You do suggest that there are secret talks going on to get publishers paid — which I hope is accurate, but if they’re coming from the same headquarters that promised all the stores would remain open and no one would lose their job, um, I don’t know that I find them a reliable source of information. In fact, they’ve sounded out of touch and overly optimistic. The fact is, I’d prefer to see FCS remain in business. But that doesn’t mean the current leadership is really on track to make that happen.
YAH Im a Credit manager at Gift Co that shipped $100K of giftware to FC in JANUARY! Guess what??? You KNEW you were filing, and STOLE that merchandise from us. We are out that money, very CHRISTIAN of you.
Sigh…
I keep saying someone needs to open a store called, “Jordan,” (think Christian Amazon) and take the CBA into the 21st century.
I lost my job at a Christian gift company because of the Family bankruptcy. I could lose everything because of them. It affects me personally and I’m heartbroken.
Terrible, Debbie. I’m so sorry. It’s easy to forget there are people with dreams and futures and bills piling up because of this. What a nightmare for the people who trusted them.
Ugh. Debbie, I’m so sorry. And I’m glad you said something, so nobody will think I’m just trying to be controversial. This is affecting the lives of people.
I own a small business, and pay others for their work. If suddenly I’m told that, say, a $40,000 payment we’re supposed to receive wasn’t going to come in, I’d be in a world of hurt. You can’t pay people if you don’t have money. That’s the situation many smaller businesses that had products in FCS stores are facing. And if I was the guy who had just dropped off a few thousand dollars worth of product on consignment, then was told I not only wasn’t going to be paid, but I couldn’t get it back… well, I think I’d be showing up with some boxes and a couple of very large friends.
Thanks for the chuckle, Chip. I can’t help picturing you all turning up in kilts like the one I saw you in at the ACFW conference in Denver. Seriously, it just doesn’t make sense to me that publishers can’t simply go and pick up their books – with or without some “Heavies”.!
So sorry, Debbie. Waiting for my relatively small royalties is nothing compared to your loss and that of so many others. I do so agree with the priorities of what should be in shops, Chip! (And that really needed the.. !
Thank you so very much for this explanation, Chip. It has all been very confusing for this Aussie, but sure makes me concerned for us all. I know that the two main Christian bookshop chains here are also having a tough time. VERY interesting about the other “stuff” shops sell besides books. Christian shops are the only places here to buy “good” items with reminders from scripture verses. As much as I love books, would hate to not have any at all in our shops. However, there are what we’d call too much “garbage” in some shops too. There sure are limits!
I know that people of faith like their inspirational art and t-shirts, Mary, and I don’t begrudge them that. What I’ve not liked is the movement away from books and toward all that other stuff, when in fact stores that had re-focused on BOOKS were doing well. That was a lesson that never really caught on with Christians, for some reason.
Chip this whole imbroglio is sad, amazing, and utterly maddening. There’s no way it’s going to resolve itself in a way that leaves all parties even moderately satisfied.
It could, but I doubt it will, John. It turns out while Mr Jackson & friends have said they’re dropping their purchase plans, they have ANOTHER plan to still acquire it. And, the worst news of all, that may be the only way for authors to get paid anything. Because if a wholesaler steps in, they’ll just sell off the stock for whatever they can get, shutter the store, and that’s the end. Sigh… life ain’t fair.
I haven’t gotten paid by one of the houses I write for, but have been holding out hope that I will receive my money. Now I’m thinking I probably shouldn’t hold my breath. At least that money won’t make or break us. My heart goes out to all those in our industry who are facing job loss or company shutdowns. 🙁 Thanks for the info.
I don’t want to be Mr Negative here, but no, I would not hold out hope of being paid. The fact is, most of the books currently in stores will be sold at a discount, the publishers will not be paid, thus there will not be anything to share with authors. Sorry, but that’s how I see this playing out.
You always have the pulse on these stories Chip. Do you know if this is the same Richard L. Jackson that owns Jackson Healthcare?
Bonnie, I think that’s what he said in answer to Ane’s comment.
I was asking if he ran the specific company I named above because that is the company Jeb Bush just stepped down from their Board in December.
Well, we’ll have to wait for the expert on that!
And yes, that’s the company that Jeb Bush just stepped away from. (Though I have no idea why he did so. Maybe it was taking up too much time on his schedule and keeping him from running another thrilling “Bush for President” campaign?)
ROFLOL…or maybe he saw the firestorm coming and he was ducking for cover 🙂
That’s the guy, Bonnie. Richard L Jackson of Jackson Healthcare and FaithBridge Foster Care, headquartered in Atlanta.
Oh man! This is even bigger than imagined. Very interesting developments. LOL…thanks for keeping us up to date Chip.
Thanks Chip, this is the best explanation I’ve seen anywhere. Do you think this also serves to illustrate the larger challenges in maintaining the brick-and-mortar Christian-products channel? When I was a Christian retailer, FCS stores represented the best-of-breed (with a few exceptions), however the #’s I’ve seen put the average FCS store at <$1M annually. With footprints somewhere in the 2,500-5K sq.ft. range (the store in COS is much larger than this) as well as the margins and overhead (and lack of product turn), consignment deals with most vendors could only stall the inevitable. Wiping away the debt will not fix the long term challenge, what has happened to the active CBA customer? Will there even be a CBA channel in 10 years?
That’s a fair question to ask, Michael. I think the market is obviously still there, but the location/distribution has changed. We can’t blame Family Christian Stores for falling apart in a market where LOTS of bookstores have fallen apart. We CAN blame them for ordering in product they knew they’d never be able to pay for; for taking in product on consignment in bad faith; for trying to buy the company from themselves in order to keep from paying millions in outstanding debt; etc.
One thing that bugs me is that the evidence with bookstores is clear: small stores that have focused on BOOKS have done better than bigger stores trying to sell books, games, puzzles, t-shirts, jewelry, and random crap. I’m tired of the apologists saying that FCS had to do that in order to survive. The evidence suggests otherwise — that stores who focus on BOOKS establish a more consistent clientele. It’s like I say to people: “I love stopping into “Family Christian Stores whenever I have a crying need for another Precious Moments statuette…”
That’s interesting Chip. I’d love to see that data. Also, are you talking about Christian stores that focus on books? I’d love to see more emphasis placed on highlighting that trend if it exists.
Also, as I understand it Jackson has dropped the “stalking horse” bid but still plans to bid in the auction phase. So, let’s say he’s successful, you think pubs won’t sell to him? I think that is going to be really tough to say no to, even considering the aforementioned character issues.
The CBA Christian gift phenomena isn’t something that only FCS bought into, the vast majority of stores have. The margins are much higher, it gives the stores a chance to carry product that isn’t as competitive and, where it sells well, it helps to cover for dead book inventory.
I’d venture to say that the CBA bubble burst somewhere around 2005-06. With the growth of the 90’s many CBA indies overbuilt and overextended themselves. Vendors and pubs kept feeding the monster with crazy terms and have now dug themselves into their own holes with super deep discounts, credit/rebill scenarios and near-consignment payable terms. Setting aside their motives and unethical behavior, FCS’s challenges serve to bring to light what has been happening one store at a time for the last ten years among the indies.
If there is a model for BOOKstores to do well, I’d love to see it. However, I believe it’s an anomaly (there are indy stores like Changing Hands in Tempe, AZ that do really well) and likely more difficult in the Christian-only genre.
There are models of bookstores doing well. Independents owned by people who 1) love their community, and 2) love books. If you love putting books into the hands of readers, you can find ways to sell books to them. The CBA market has always struggled with that. I remember once a colleague saying that one of the Family buyers wasn’t much of a reader and it completely shocked me.
Slim, I would agree with you…in part. However I was that bookseller for a decade. Loved my city, loved books that had an impact on peoples’ lives. However the margins to stay profitable as a brick and mortar bookstore just aren’t healthy enough to be sustainable/scaleable any longer. Just ask Barnes & Noble.
Even worse than the financial suffering this will cause will be the eternal cost. How many people will reject Christ because they see His followers as hypocrites and crooks?
Christians need to realize that doing something for a “ministry” should not negate good business practices and wise financial decisions.
One interesting thing that people have raised with me… Family Christian put millions into the “90 Minutes in Heaven” film that releases this fall. The announcement was made mid-March — after FCS had already announced it was going through bankruptcy. Um… can somebody tell me how that can be happening?
Luke 16:10 comes to mind (among others): “Whoever can be trusted with very little can also be trusted with much,
and whoever is dishonest with very little will also be dishonest with
much.” Being a Christian and having “good intentions” doesn’t negate the need for good stewardship. In my opinion, it only sets the bar higher.
Oh that hurts…says the author who was supposed to have a major display at FCS soon…
Yeah, and I’m sorry, Brooke. No idea how things will look by mid-May. No idea what the relationship is like between Harvest House and FCS right now (though “toxic” can’t be too far from the truth).
Chip, sometimes I hate it when you “tell it like it is”…especially when it’s true.
And “ephemera?” When is the last time you used that one? Thanks for sharing this (although it’s not a prelude to a happy weekend)
I didn’t want to say “in addition to books, they sell a bunch of religious trinkets and crud,” Richard, so I used the best word that fit the situation. But John 3:16 socks, Precious Moments statuettes, Thomas Kinkade cottages, Moses action figures… yep. Ephemera.
So, Chipster, when did you stop calling it “Jesus junk”?
I thought they’d torpedoed the Section 363 sale because of this very criticism of Jackson’s actions/intentions and decided to file straight Ch 11 proceedings. Was that just another ball of spin as well or am I misremembering the situation? I feel like you’d need to be a bankruptcy lawyer to really understand all the nuances.
No, you had it right, Carla. This was supposed to run a couple weeks earlier, but I delayed until the hearing occurred, since it wasn’t really clear what was happening, and, well, nobody was really believing the BS coming from the Family Christian Stores people. (I particularly liked the statement where they said this was all being done “out of love for the mission of Family Christian.” Uh huh. If this is love, I’d hate to see what they do when they DON’T like publishers and authors.)
Wow. Just…wow. I’ve always been a big customer at FCS, now I’m more than half-way convinced to take my business elsewhere, especially since authors aren’t going to make any money off my purchase of their book. How very, very disappointing and disheartening.
Agreed, Casey. And as of today there’s a high likelihood you won’t be a customer of FCS at all…
Incredible. Been following this story. Really, really wish this was playing out differently. FCS’s actions seem to be a bad plot-line designed by a fiction author to submarine a good portion of the Inspirational market.
They didn’t intend that, of course, but that’s exactly what occurred, Peter. For Christian authors, this is a disaster.
Um YIKES!!
Yikes is right, Tiffany. I hate what this is going to do to the Christian book market.
Unbelievable! What a jerk.
Richard Jackson owns one of the largest health care companies in the country. He may have had great motives in all this (“let’s use the profits to fund ministries!”), but he certainly put himself in a bad light by setting himself up as the owner, buyer, and creditor. And, in case you missed it, he is the primary creditor in the bankruptcy, according to news sources. So even though the company fell apart under his watch, he gets paid first.
That is just so wrong. When one of my grandfather’s three businesses faced bankruptcy during the Depression because the farmers couldn’t pay their bills, he and his brother opted to put the other two businesses and all they owned into the hands of the receivers so that everyone would be paid. The judge suggested they were being too honest for their own good. But that example has stayed with me. These two wealthy men sacrificed all rather than protect themselves at the expense of others. Life was hard after that, but I know they touched many lives as their father had before them.
There are many businessmen who could learn a thing or two from their example–and neither of them claimed to be working in the Name of Christ.
That’s the most frustrating thing–with Family Christian Stores, “Christian” is literally their middle name, and yet this is how their owners behave. Shameful.