How Fireclay Tile's CEO learned to plan for success

0:03This is Business of Home. I'm your host, Dennis Scully. Every week, I'll be speaking with leaders and innovators from all corners of the home industry. My guest this week is Eric Edelson, the CEO of Fireclay Tile. The last time Eric was on the podcast, he shared the story of how he took over the company and in a Jerry Maguire-like moment, turned its business model upside down. Six years later, and Fireclay has grown considerably. And Eric has been on an acquisition spree, recently picking up Fox Marble, a sizable Bay Area fabrication and installation firm. I spoke with Eric about why running a company in California is both an opportunity and a challenge, why he still believes in the B Corp model, and why the biggest change to his approach has been learning how to plan for success.

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2:47Yeah, we're deeply proud of it. So Fireclay actually turns 40 years old this year. The company was started in 1986 in San Jose, California, by a gentleman named Paul Burns. His tile roots ran deep. His uncle had a tile factory in San Jose going back to the 1950s called Stone Light Tile. and Paul got together with a few friends, started Fireclave for, say, the next 24 years or so. It was a small ceramic studio that served high-end tile stores around the country. I happened to meet him through one of my friend's fathers in 2009, actually 2008. I had just finished business school and was looking for kind of an adventure, something entrepreneurial.

3:28I didn't necessarily want to go work in a far traditional organization, which at the time where I was living were companies like Google and Facebook. It turned out those did pretty well. Yeah, I'm so glad you didn't go work for one of them. Exactly. Heaven forbid. But no, I just always had, I started my career investing in early stage healthcare companies. And frankly, I always wanted to be on the other side of the table. Always wanted to operate and run a business. And I met Paul just kind of on a whim, decided to shake hands with him we struck a kind of an agreement that i would kind of come in and help there was no job title there was no list of responsibilities it was just due the joke is that my wife had given me five years at fire clay because we had just had our first kid i was commuting an hour and a half each way i was really making no money uh and so i was desperate and i had this epiphany that we had a good business we just had a bit bad business model and woke up in middle of the night in February of 2013 realized that we're never gonna have success selling tile wholesale we need to go direct we need to become a brand I was inspired by companies like the shade store at the time and decided just you know let's do it and decide to basically get out of wholesale to kind of quote unquote fire our customers so somewhat throw the Hail Mary pass raised a little bit of capital from friends and family and January 6 2014 relaunched Fireclay to be a direct, vertically integrated brand.

4:56And that basically set us off on this journey to really transform Fireclay, to grow it. We hit every single challenge one could imagine trying to not just scale a design brand, but also scale a manufacturing company to do it in California. We became a certified benefit corporation, as I believe a lot in social responsibility. And fast forward to today, Today, Fireclay, we're just about 420 teammates throughout the United States and abroad. Today, we have three manufacturing facilities. We're going on 10 showrooms. We've stayed very true to the original founding story of Fireclay, which is beautiful craftsman manufactured products made domestically here in the United States.

5:44And we're doing that in ceramic tile. We're doing that in glass tile. We're doing that in glace thin brick, beautiful hand-painted tile, mosaics, custom colors, custom designs. And most recently, we have gone into the services side of the business through several acquisitions in the tile installation space and are now doing stone fabrication, stone care and maintenance to the acquisition of a company here in the Bay Area called Fox Marvel. So the business has really very much evolved and grown, but really stayed very true to the roots of Fireclay. in a modern way, using technology. Well, tell me a little bit more about that.

6:23So using technology and doing it in a modern way, what does that mean in this context? So one of the disadvantages of Fireclay is that we're based in California. So you look at any CEO survey, they say California is, you know, the worst state to do business in. The most challenging state, perhaps, right? It's a beautiful state. It's really incredible. And it feeds so much of the nation, but also a really challenging place to run a manufacturing operation. Absolutely. Absolutely. If you're not high tech, raising gobbles of venture capital money, it can be hard. But I would say that on the flip side, the spirit of innovation, the spirit of entrepreneurship has really, I think, pushed us.

7:04And we have a location that's in downtown San Francisco, right in the Soma District. We are catty corner to Airbnb across the street from adobe and so i think that spirit of customer fascination customer obsession using technology has has really been front and center the first thing i did at firefly back in 2009 was implement salesforce was redesigned our website and and so one of the themes that i see uh in the in the services space uh specifically on tile installation and stone fabrication is there's also that same opportunity for for technology and technology advancement to make those services more exciting, more experiential for our clients.

7:45So yeah, I mean, I've just become such a fan of technology and Fireclay has been a really fun platform to embrace technology across all facets of the organization. Fraser Cain - And is and is AI become a meaningful component of that technological embrace that you described? We're on our way. So I think that when I first used ChatGPT or these tools back in 2000, what, 23, I mean, I was profoundly struck. And I thought it was so compelling that we launched a CEU for the design industry on training designers and architects on how to use ChatGPT. We trained over 2 ,000 or trade clients on how to use these tools.

8:25And I think if you came here, you'd find almost every person here is using AI in some way in their work, whether it's through custom gems to help them craft better emails or to negotiate better with vendors or to find more opportunities for conversion for our sales team or better coaching. You're going to find it on the factory floor. You're going to find it in our technology team. I think where we are today is that we're not at that next phase, what we'll call the agentic phase. So we haven't necessarily found ways that AI can start supporting our team with taking over processes or starting to handle repetitive types of work.

9:11But I think we're going to get there. I will say that on the technology side, the engineering side, we're getting extreme benefits. I mean, we are moving so much faster with building tools. We just went live on Shopify. A typical migration for a website might be six to nine months. We did it in three. The power that we're getting in terms of data insights, reporting is just exceptional. And the tools that we're able to build, not necessarily externally, but internally for our sales team, for our manufacturing teams, have been really exciting to see. So I think that's a big opportunity for us over this next year.

9:50But clearly, it sounds like the data mining part of it has been a huge value for you. Yeah, absolutely. I mean, I think that, yeah, I mean, almost every day with Claude now, especially, I'm just dumbfounded at what we're able to do. So today's example, or sorry, yesterday's example, I'd say for the last 10 years, every morning I open up my email, I have kind of this email summary from Salesforce of every transaction from yesterday. So every book order, every quote that was sent out and every sample. And it's just, you know, it could be three, four, 500 lines of information for all the different, you know, salespeople, customers.

10:31And I kind of go through it and I click on things to see what's in there. And I sent an email to our interview team and I said, hey, you know, it would just be, I kind of want to like get the daily news summary, like almost like a, here's what yesterday's news was. And, and Dave, our VP of technology is like, no problem. Claude can do that because through MCPs, we got Salesforce feeding in and a lot of our data models sit on Snowflake. And so today I woke up with this beautiful branded summary of yesterday, where samples came from, what salespeople closed orders, what clients purchased from us and what products they were ordering from us.

11:07And it was just so pretty. And so that was amazing. And he probably spent five minutes on it. So I think those ways of how we're starting to really take information and data and bring it to life in a way that's starting to be really understandable. We're able to create, for example, sales workbooks. We have about 60, 70 sales professionals. Caitlin, our VP of sales, she's now creating individualized sales workbooks for every teammate that is not just kind of telling them, like, oh, this is how you sold. It's really giving them insight into how they're doing, how they're doing against their plan.

11:44where they have opportunities for improved conversion, either on the homeowner side or the trade side, what products they're selling successfully, what services we offer that maybe they have an opportunity to do more with because we see better engagement when we offer those services. So those are just like the great examples where you're really taking the information and feeding it back to people in a way that they can actually start to understand and make sense of it. And where we can actually, again, use these tools as partners for them to help them have more success. So those are some of the great examples where it is very much coming to life.

12:17But yeah, to now think that instead of what I've had for the last 10 years, which is this just, you know, lots of lines of orders that I have to sit through and start to, I mean, you know, figure out I can actually just get this like beautiful branded yesterday's recap. Like, that's cool. That's awesome. I want to come back and talk about this notion of you sort of looking at Shade Store as a great model because it seems like you're moving closer and closer to that, to that model with some of your recent acquisitions and, and how you're thinking about them. So let's, let's talk about it because now it's, it's gone beyond the, the tiles themselves.

12:57And we all, I mean, I think every entrepreneur has, you know, we, we want to solve problems. And I think that any great person will tell you, you know, find a problem to solve. And, you know, usually that means there's an opportunity. And so I just saw so much customer pain, so much frustration. I mean, this industry has so much product coming from so many different places. And what I just consistently see is a lack of experience. I see a lack of customer obsession. It's just this product kind of thing. And I think for Fireclay, it was always, okay, there's a lot of product out there. How do we take the experience to the next level?

13:33And so back in 2013, I just kept looking at the dealer model and saying, is this really the best customer experience? You know, to walk into a showroom and see 90 different vendors, every single product under the sun. You don't know where that product comes from, how it was made, who made it, when you're going to get it, how it's priced. And, you know, we just saw so many designers and architects wanting to work with the maker, but it was so challenging because these makers were not set up for it. So I think that was kind of the first problem that I saw that kind of our shift to, you know, being a pure manufacturer selling to retailers, you know, to go vertical and ended up acquiring a small business in the Bay Area called Heritage Marble Tiles.

14:14And it started us on this journey of trying to figure out how we could have an impact in tile insulation. You know, we made a lot of mistakes along the way. I had this ridiculous idea that we would only install fire clay and that only, you know, people would only buy fire clay. That didn't quite work out. I had this vision that we would take this to our other showrooms down in LA and elsewhere, tried that, that didn't quite work out you know so you know plenty of failures but but you know just kept kept hammering and improving technology improving starting to think about how we train people um how we bring technology to the forefront uh how we sell it and that led me to realizing okay this is really cool but right now this is pretty small we got up to about 17 people it was taking up a lot of my time uh and so it was either are we going to do something here and So we needed to kind of take a major leap or not.

15:03And so that's when the Fox Marvel opportunity presented itself. And Fox Marvel also was 40 years old, started in 1986 by a wonderful gentleman named Charlie McLaughlin. And we were able to strike a deal last fall for us to acquire. We closed on that acquisition on February 2nd. And that really allowed us to kind of almost 10x the opportunity. We went from about 15 people to about 130 people. But Fox suffered from a lot of things that I saw when I first got to Fireclay. It was a little bit outdated in terms of technology. I think some of the opportunities on just the organization, leadership were there.

15:41And so it created a wonderful opportunity for not just myself, but for the entire Fireclay team to really step in and add tremendous value. So I'm now currently running both companies. That gets me really excited for this next phase. I mean, I tend to think about things in 10-year visions of like, what is the next decade going to look like? And I think we have an amazing opportunity to create an example installation and services company that, you know, I hope we can train others. I hope we can inspire others because I think what we see in the tile installer side is, you know, many people leaving the field.

16:13We also have a giant immigration issue where so much of our labor comes from. But we see a lot of the master craftsmen aging out. They haven't done a great job with succession. They don't have someone to take over. And we don't want that skill to get lost. So, you know, we're focusing on training, focusing on technology, we're focusing on communication and process. And I think we can have a huge impact. So we're doing that in the Bay Area right now. And maybe we'll expand, you know, from there. But right now, you know, very, very focused geographically on the Bay Area.

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17:27We're told today that part of the reason that you want to become a tile installer or a furniture maker or an upholsterer is that your profession is not going to be eliminated by AI. You're going to be safe, right? Because you're going to be doing something that no computer program or app on your phone is ever going to be able to do. And joking aside about that, when we think about how do we get people excited about getting back into getting trained in this profession? I mean, is that a helpful notion for people that this seems like it has a long-term career tied to it? That, yes, this can be a future for someone.

18:12I mean, I believe so. I mean, not everyone wants to sit behind a desk all day typing away and talking to their AI. A lot of people want to be out in the environment in a variety of spaces. Installing, waterproofing, cutting tiles. Absolutely. Absolutely. I don't think that the traditional education path, I mean, it worked for me and I would never take it back, but I don't think that necessarily works for others. And again, you'll get almost anything, the average age of a home in the United States. what we need to do to continue to build, to support our population. Just general maintenance. I mean, you take a design in this industry, again, there's so many designers, so much product, so many projects that people want to do, but it's the access to labor that is the hardest thing always to find.

19:05And yes, you can go build a new porcelain facility in Tennessee and churn out millions of square foot of tile, but someone's got to install it. And maybe at some point, Elon's robots will be there to do it. And in some ways, I hope that happens because like I said, I think we're going to need it. But I think, yeah, there's tons of great blue collar jobs out there. And I think these are great places for people to earn a great living, have career advancement, have a subject matter expertise that they will have forever. So yeah, I'm very bullish on that. Absolutely. And I think that to give credit to certain places, in home, we've seen huge improvement in HVAC, electrical, roofing.

19:49And those are very, very competitive industries right now. Private equity has taken a foothold. But they're not construction. They're much easier. They're not a live work site. They can be done very independently. These professions where we're talking remodeling, when you're in someone's home, where you're doing something interior that relies on other trades, that relies on general contractors, that has a design element, it's a completely different ballgame. It's far more complicated, which is why you actually don't see a lot of private equity in here unless it's at the kind of lower end of the market.

20:24And we need it. And we have to stay competitive or else all these great craftsmen that would come into our industry will go elsewhere. So I think we got to give these people a great home, a great experience, because otherwise they'll be pulled into another industry and we're going to need this in the design world. Well, it is really complicated, Eric. And to your point about private equity, do you worry that private equity looked at this and said, no, it's too darn complicated, it's too darn hard? But no, you decided to step in and say, not for me, not after what I've built at Fireclay. Go ahead.

20:57Did you talk to anyone about this? Did anyone try to dissuade you from this, Eric? Go ahead, you can tell me. So Fire Clay, we've needed capital to grow. This is a high capex business. And I always joke that I've had to beg, borrow, I wouldn't say steal, but plead on hands and knees for capital for the entire 18 years I've been here. And we have great lenders, we have great investors. And so our primary investor is a group called Providence Growth and a gentleman named Anthony Cho. And Anthony, the first time I called him to tell me about this, his first comment was, Eric, don't you think you already have a complicated enough business?

21:37My man, there you go. Yes. And you're going, well, you know, is it though complicated? Really? And Fireclay is very complex. There's no doubt about that. So he's not wrong. And at the same time, I think that where Fireclay has always excelled is really in the complex. And I've been really fortunate to have partnered with an incredible group of teammates here who just care deeply and are incredibly passionate and hardworking. And I always tell them, you know, hey, you know, we want to we want to manufacture our products. We want to do it the right way. We want to give ownership to our teammates.

22:14We want to be a certified B Corp. We want to care about the environment. We want to do this all domestically. It just means we got to work harder. That's just the mantra internally. We just got to outwork other people because we do we do take the harder approach. and I think that another approach might be, oh, we'll just outsource this. We'll create a network of installers but I think to do it the right way, yeah, we got to kind of own it. We got to run it. We got to take responsibility for it and I think that the bet I'm taking is that we've got a very strong team at Fireclay where I can spend a good portion of my time on Fox and pull some of those teammates in as needed to support and that the Fireclay business will continue to thrive And, you know, to me, it just creates opportunities for other people on this team to step up, take more accountability, take more responsibility, no different than what I had when I came in here.

23:04And what we're seeing is we're seeing a ton of growth happening at Fireclay right now for so many reasons. We keep attracting tremendous talent. And part of, I think, our long-term thesis is this is our sixth acquisition. I'd like to do more over time. And so building that muscle, building that acumen, building that competency, because I think there's a lot of owners out there who frankly don't want to sell the private equity. And to be a strategic acquirer for beautiful craftsmen oriented products, I think fire could be that hardware to people. So I think in long term vision, I've been here for 18 years.

23:40I hope to be here another 18 years. I'm having so much fun and I hope to have a wide variety of products and capabilities that we can offer the trade. because I think the trade wants beautiful crafted products. I think if they had their choice, they would turn to domestic sources. They want things that they can depend on, where they can call and get customer service right away, where if there's an issue, it'll get sorted, where the lead times can be tight and fast. And I think we can offer that. But yeah, we're out there on this one. But sometimes I say, if not us, then whom? and having gone to a lot of these tile shows and talked to a lot of customers, there's a lot of worry about the future of professionals in this space.

24:25And on the Fireclay side, there's so much product now. There's just so much tile product. And why is that? Why do people think it's so easy to step in and make tile? And what is it about this industry that seems like it has such a low barrier to entry? I don't know. I don't know because it's not even a very big market. It's not a very big market. At the height, it's even smaller. But yeah, we see new entrants all the time. With Shopify and AI, it's never been easier to start a website. And we see that. And it's actually quite easy to look quite nice right now. And there's many manufacturers, mostly outside the United States, because truly we only get 20-25 % of our product domestically, that just can't wait to offer their products pretty expensively to people.

25:11So yeah, I don't know. I think something that goes back to, I meet so many people who I think have just a love for ceramics. I think some of it comes back to that, like being a kid, playing with clay, playing in the dirt. There's something about it. You know, you meet so many people who are taking pottery and spinning and throwing bowls and throwing plates. So I think people have a love for it. And when you go back in history, right? I mean, tile and ceramics, it's basically been, you know, a core part of the human experience. So, you know, it's not lost me when people get excited about it, But it is a tough market and there's a lot of product out there.

25:45And Fireclay, we're taking shots on both expanding our product offering and we've launched more product in the last year than I think we had launched in the five years previously. We just entered the bath category. And so you're seeing us, again, be more diversified with our own products and starting to kind of layer in some additional product categories that I think lend themselves well to our customer. But I think kind of, again, going into other services categories, potentially in the future, getting into other product categories will be part of our growth story. But you're always going to have this element of the craftsman side, that domestic manufacturing experience side that I think really sets Fireclay apart from anyone else.

26:22Talk to me more about the bath side. And I've seen that great product and it's beautiful. And yeah, but again, not an empty playing field, the bath space. I've heard there are some pretty big players in that space already. I used to work for one of them. But I mean, what I'm wondering is, did it make sense because it just seemed like such a natural extension of the tile and the people that were already coming to you for that? Or how did you think about that and what made it appealing? About a decade ago, I had met Avi Abel. He used to lead Watermark Designs in Brooklyn. And Avi and I became good buddies.

27:05and he had built a really successful business with his father that he successfully sold. Through his partnership, we designed and developed a bath collection. He had always had this love and desire to do something with ceramics in bath, and so we were able to bring our ceramic expertise to that, which is where we launched our beautiful ceramic candles. It just made a lot of sense, and I think we were also sitting here saying, gosh, I think we might have picked the most difficult category, which is beautiful custom tile. What if we try some other categories that may be both a little bit larger in market size and potentially even easier to sell in some ways just from a technical competency?

27:51As our sales team, we spent a lot of time training them and it's been great. We launched it in November. And so far, so good.