Can Costco Founder Add Retail Venture To His Line Of Successes? -- Driving Change

It seemed like a stroke of luck that got the financing off the ground for what eventually became Costco, back in 1982.

Actually, it was a strike of lightning. In the middle of a thunderstorm, it hit the airplane carrying Jeff Brotman, now vice chairman of Price/Costco, from Palm Springs, Calif., to Seattle.

Badly crippled, the plane made an emergency landing in San Francisco. During the four hours passengers spent on the ground, Brotman shared his dream with another passenger, investor and businessman - Fred Paulsell.

"I said, `I think I can help you raise the money,' " Paulsell, now a Price/Costco board member, recalls. Within several months, Paulsell had introduced Brotman to contacts in the investment community and helped raise the $7.5 million needed to get the company, founded as a limited partnership called The Cost Club, rolling. The first warehouse opened in Seattle in September 1983.

With $7.5 billion in sales in 1993, Price/Costco (Costco merged with Price Co. last year) has grown into Washington's largest retailer. Along the way, it has helped change the face of retailing and the buying habits of consumers, who now are matter-of-fact about shopping in warehouses, buying cheese in 5-pound bricks and pushing dollies through aisles lined with pallets.

Now Brotman is on to a new venture - Logan Drive, a men's private-label clothing chain that opened stores last week in Seattle and Bellevue. Some say it's a concept that may test Brotman's reputation for bringing a Midas touch to new businesses.

A lawyer by training, Brotman, 51, is a third-generation retailer who worked in the family clothing store, Bernie's, while attending the University of Washington, where he earned a degree in finance. He was an early patron of glass artist Dale Chihuly, whose work adorns the Brotmans' stylish home on Lake Washington, and a devoted Sonics fan, with season tickets not just on the floor but on the players' bench.

Since founding Costco, he has played a pivotal role in the formation of a string of other retail companies, notably Garden Botanika, a natural cosmetics chain; coffee purveyor Starbucks; and San Diego-based Sweet Factory, a chain selling bulk candy by the ounce.

"At the end of the day we had to prove ourselves, but it was Jeff who clearly opened many doors," says Starbucks Chairman Howard Schultz, who adds that Brotman, a major Starbucks investor and a board member, mentored him during Starbucks' early growth.

Despite the fact that the project bore Brotman's imprint, finding the $7 million to $10 million required to finance Logan Drive's first year wasn't an easy ride. Reportedly, potential investors worried that the chain faced too much competition from retailers such as The Gap, Eddie Bauer, J. Crew and others.

"It was a tough sell," Brotman says, "but we raised a significant amount of money."

Logan Drive took over the real estate of one of Brotman's oldest ventures, Jeffrey Michael, a chain of men's clothing stores that closed several months ago.

The first of Logan Drive's seven stores in Washington and Oregon opened last week in downtown Seattle and at Bellevue Square; eight more openings are planned for next year. Headed by a former Eddie Bauer executive, Julie Cosser, Logan Drive hopes to have 25 stores by the end of 1996, all selling comfortable clothing to male baby boomers.

Brotman insists there is a niche for his chain.

"We were looking at where you could buy this stuff at these (prices), and (generally) there wasn't anyplace to do it," says Brotman, clad in a blue-and-white-checked, button-down shirt, knit tie, slacks and no jacket.

Targeted at the 30- to 50-year-old man, Logan Drive offers everything from white shirts and silk ties to chinos and T-shirts. It's mostly clothing for the office, as opposed to the more rugged weekend wear generally offered by Eddie Bauer and J. Crew, although an upcoming Eddie Bauer line of office wear, A.K.A. Eddie Bauer, could give Logan Drive a run for the money.

Last week before the opening, the Bellevue store was clearly a work in progress. Employees in T-shirts and shorts sat cross-legged on the floor, opening boxes, stacking folded pants and sorting shirts. Little merchandise was on display, but what was might give The Gap pause.

For example, an open-weave, cotton plaid shirt was $30 at Logan Drive. At The Gap, a shirt identical but for the color was $44.

Brotman, whom friends say is personable but seems guarded on first meeting, becomes animated when the topic turns to distinguishing quality in clothing.

"This $30 dress shirt has everything that a $40 or $50 shirt has," he says, sweeping up a folded white, button-down cotton shirt from a nearby table and running his hands under the fabric and between the buttons, to demonstrate the fineness of the cloth.

Many shoppers, Brotman admits, initially won't understand how much of a deal they're getting. But, he says, quietly confident, "Over time, people will get this."

Brotman's confidence generally has been well-placed in the past. But he's had his missteps, most notably with Bellevue-based ENI, which sold oil and gas drilling partnerships that were popular as tax shelters. ENI was a client of a law firm founded by Brotman and his UW law school roommate, Earl Lasher.

Brotman became president, then vice chairman of ENI, leaving in 1982 as sales plummeted with the downturn in oil and gas prices. By the time Brotman left, ENI had soared into the ranks of the nation's largest oil and gas tax shelters, and fallen, leaving a lot of angry investors behind.

"He's a little protective," says one acquaintance. "I think part of that was from the ENI experience."

In an interview last week, Brotman generally declined to talk about his other business ventures except Logan Drive. Usually, though, success has been his companion.

"I think Jeff sees himself as a success and always has," Lasher says. "It's not in his computer to be anything but a success."

Brotman - remembered in his younger days for tooling around in a mint-green Porsche with a vanity plate with his initials, JHB - always had business interests on the side, it seemed. While attending college, he helped his family start a Bernie's store in the University District, and he played with other concepts, some quite successfully, some less so.

Lasher remembers one, Man Bites Dog. It sold hot dogs from a cart, but Brotman was not the one behind the weiners, making change.

"He was always the brains behind the deal," Lasher says. Through the years, Brotman also was involved in Bottoms, a women's casual clothing store, and other family retail ventures.

It was with Costco that he apparently started refining the model for his future businesses.

One common thread running through Brotman's businesses beginning with Costco, Schultz says, is that they've been characterized by "a paradigm shift in many of the concepts." Shopping at a warehouse club. Selling private-label cosmetics in a specialty shop in a mall, not in department stores or drug stores. And now, offering private-label, casual menswear at prices appealing to consumers seeking comfort, reasonable prices and high quality.

"I think that demonstrates Jeff's ability to think out of the box," says Schultz, a close friend.

For his part, Brotman says the companies he's been involved with - Starbucks, Garden Botanika, Sweet Factory and now, Logan Drive - started out trying to create a brand distinguished by high quality and reasonable prices.

"We were trying to build a brand," Brotman says. "We're not just trying to operate another store."

Although Brotman usually wasn't the first with a concept, he was skillful at spotting a concept early on, then using his retail expertise to refine it and his financial clout to make it happen.

"He has a talent for finding opportunity, bringing everything together and letting it go," says Mike Luce, president of Garden Botanika.

Throughout his career, Brotman has been known for his tenacity. Costco, for example, was not an easy sell. Paulsell recalls that he and Brotman initially approached "every investor that was warm" in the area and met with no interest.

Others point to the seemingly endless discussions Brotman has endured to secure sites for Costco - including the initial negotiation with 20 landowners to get the Kirkland site.

Given his financial interest in other companies, his positions on their boards and his consulting role with some, a few shareholders might get the idea that Brotman isn't minding the store.

That's not the case at all, say those who know him.

Paulsell says Brotman puts in 50- or 60-hour weeks at Costco, then tends to other business interests, such as Seafirst and Starbucks board meetings. Brotman and Price/Costco President Jim Sinegal are extremely hard workers known to use time on the company jet to surround themselves with their staffs and work through every flight.

Analysts say Costco faltered after merging with Price Co. last October but should recover its momentum with the recent spinoff of some of Price's real estate and foreign business.

"It'll be the Jeff and Jim show again," one insider remarks.

And the future for Brotman? No doubt there's another retail concept around the corner. Perhaps it will be an idea pursued jointly with Schultz, who says he and Brotman often talk about business opportunities.

"I certainly wouldn't rule it out," Schultz says.