Even his wife had doubts.
"The night before he bought it, he said to me, 'I think it could work,' " Geraldine Fantle recalled. "But part of me wondered if he wasn't jumping from the frying pan into the fire."
But jump Sheldon W. "Bud" Bud Fantle did into the mire at troubled Dart Drug Stores Inc., the Washington discount drug chain the 67-year-old businessman took over in late 1987 and aimed to drastically re-create into an upscale, service-oriented retailer affluent Washingtonians would flock to.
It would cap a long and extraordinary career in the retail drugstore business in which Fantle built a legendary reputation for engineering the transformation of Peoples Drug Stores Inc. from a sleepy local chain to regional powerhouse.
It would be a reward and a little bit of retribution for a longtime employee who made fortunes for other people and now was looking to establish a business all his own.
And personally, it would be a way for a father to leave a lasting legacy to his son, in much the same way his own father had tried to do for him.
But it didn't work out that way. In mid-1989, the 69-store chain filed for protection from creditors and announced in August that it would shut down by year's end, throwing 2,000 people out of work and leaving debts of about $160 million before liquidation of assets.
Like an unwary consumer who comes home from a used-car dealership and finds his just-bought vehicle riddled with rust, Fantle bought a chain plagued with visible problems: huge debt, bad reputation, demoralized work force, dwindling sales, lack of support from suppliers, sparse inventories,
changes in consumer shopping habits, and heavy pressure from big superstore discounters and aggressive supermarket chains.
Many analysts said Fantle miscalculated by not seeing -- or actually ignoring -- the danger signs of a moribund business gasping its last breath. The Dart franchise, industry observers said, was nearly ready to go into bankruptcy even before Fantle came along and invested many millions of dollars. Had he waited, they say, he could have had it all for a song, been paid to guide the company out of bankruptcy and possibly still be in business today.
"Maybe I should have seen this coming and known the difficulty of making this company a success -- in hindsight, I should probably have passed on this challenge," Fantle said in an interview about Dart and his many years in the drugstore business. "But if we had succeeded, well, we would have been geniuses."
Geraldine Fantle, who has been married to Bud for almost a half-century and probably knows the business as well as he does, gives a tougher assessment. A woman with a deep sense of humor and a quick wit, she looks back to the day Fantle cut short a Mediterranean cruise vacation and rushed back to the United States to consummate the Dart deal.
"I remember him leaving the boat, all excited about getting into the business again," she recalled one morning over breakfast at their elegant condominium at Washington Harbour. "Now that I think back on all that's happened, I really have to say -- I should have tripped him and broken his legs rather than let him get off that boat."
But Fantle took the step, a costly one that would ultimately cost him and his investors at least $12 million and, he says, years off his life.
"It has been," Fantle said in a classic understatement, "quite a ride."
The journey starts in his office at Dart headquarters in Landover, where pictures of Fantle with family, other drug industry executives, Washington community leaders, politicians and an occasional celebrity line the walls.
Fantle smiles in every one of them in a jovial, arm-around-the-shoulder way that is infectious. In person he is just as friendly, the possessor of an unfailingly sunny disposition, even as he sits down and talks about a failure after a long career of success.
His personal magnetism smoothes the way over problems. His popularity springs first from his willingness to talk to everyone, often in a self-deprecating way that most executives would never allow. He takes blame and will recount his mistakes, telling all.
In a world of ubiquitous public relations functionaries and puffy press releases that wrap executives and their acts in cotton batting, he somehow makes you believe that maybe, just maybe, what you have here is the genuine article.
What do they call men like Bud? A class act. A gentleman's gentleman. A hell of a guy. Someone you'd like to be your grandfather.
"Bud Fantle is a real gem and has helped out a lot of people in the course of his career," said David Eisenberg, president and chief executive of Peoples Drug Stores, who has known Fantle for almost two decades and who replaced him after he was forced out of that company in late 1986.
"He has this incredible ability to lead and motivate. You want him to think well of you -- I think one person in a thousand has that quality," said David Pinto, editor of New York-based Chain Drug Review, an industry trade journal.
That quality, Fantle said, came from his father, Morris W. Fantle, who owned appliance stores in Cincinnati, where Fantle was born in 1923. He worked there for him from boyhood, getting his first licks in the retail trade, including stocking shelves, setting up displays and sweeping floors.
"My father and I were very close," Fantle said. "I think he taught me a lot about the way I conducted myself in business."
But the elder Fantle died of a heart attack in 1943, when the teenage Bud was still serving as an Air Corps cadet during World War II. Bud was planning on expanding the business with his father when he got back from the service, but with the senior Fantle gone, a decision was made by the family to close the stores.
"It was a shock," Fantle said. "I was really excited to build something with my father, but it was not meant to be."
After finishing pharmacy school at the University of Cincinnati in 1951, he started to work at a small chain of drugstores -- Schuman Drug Stores -- owned by the family of his wife, whom he met at a fraternity mixer and married in 1944. Things looked set in Canton, Ohio, where the young couple had a son, Jeffrey.
Fantle built the Schuman chain to 26 stores, but by 1965 was thinking bigger and tried to acquire another Ohio chain, Lane Drug Stores. It turned out Lane was owned by financier and commodity trader Adrian "Ace" Israel, who managed to persuade Fantle to leave the family business to work for him. In 1968, they merged the two businesses into a 160-store chain and then began looking outward.
Their gaze rested on a lackluster family-owned operation in Washington called Peoples, with 300 stores. Israel and Fantle managed to acquire it and in 1974, Fantle arrived in Washington to run the chain.
"He was geared for big business -- there was no stopping Bud then. He wanted to be number one," Geraldine Fantle said.
While he didn't quite reach that spot nationwide, he did take the Peoples chain to top status in the Washington area. He made the organization lean and focused the stores toward convenience and strong pharmacy sales as he expanded rapidly from 450 stores with about $400 million sales in the mid-1970s to 800 stores in 15 states and the District with close to $1 billion in sales in the mid-1980s.
Bud Fantle's glory days were in those 10 years of growth at Peoples, when success rained down on his hard work and rewarded him. It was during this time that his enormous reputation in the industry was created. And he also became extremely active in the Washington business and philanthropic community, chairing all sorts of organizations and serving on corporate boards.
In 1984, this world stopped spinning when Ace Israel announced he was selling Peoples. Israel owned a 36 percent controlling interest in the far-flung chain and wanted to cash in, setting up a $320 million deal with Canadian giant Imasco Ltd.
While Fantle had a 13 percent interest in the company and would benefit financially, he was against the deal. "I wanted to buy the company, but Ace did not want anything to mess up what was a great opportunity for him," Fantle said. "He told me, 'We're selling the company and if you don't like it you're fired.' ... It was like the popping of a balloon."
It also was the gestation point of his later involvement in Dart. "Sure, there was a lot of money, but it was like the agony and the ecstasy," Geraldine Fantle said. "He was heartbroken because he wanted to buy Peoples. I think he felt like he'd been sold down the river by Ace and now wanted very much to have a company he could control."
That was not to be once the huge Imasco conglomerate, which also owns the Hardee's fast-food chain and Imperial Tobacco of Canada, got control of Peoples. They kept Fantle on, but when results over the next two years dipped, Fantle was asked to leave.
"Before Imasco, he really was the CEO, with all sense of what that word used to mean," said Eisenberg of Peoples, which has since been sold by Imasco to the Melville Corp. of New York. "Now there were multiple layers of bureaucracy to deal with and he did not feel comfortable."
Fantle is even more clear: "I just could not kiss their rear ends."
Aided by investment bankers at Kidder Peabody & Co., he tried to acquire Gray Drug Fair from Sherwin-Williams Co., but lost out in his bid to Rite Aid Corp. Unbowed, he began signing his own leases for his own from-the-ground-up chain of stores, but the notion of getting control of a big chain never left him and he trolled for something, anything.
Even Dart Drug.
The discount chain was founded in the Adams-Morgan area of Washington in 1954 by another Washington retail legend, Herbert Haft. The business had been a great success for many years, pursuing a high-volume, low-price, no-frills niche.
In 1984, the Haft family, already off developing their Crown Books and Trak Auto discount businesses and other investment opportunities, sold the chain to its managers in a $160 million leveraged buyout, a price tag that stunned many in the investment community. The sale saddled the company with extremely high interest payments, which the new owners hoped to handle with increased business.
Revenue for the Dart Drug chain in the year before the sale, with 73 stores, topped $291.8 million with a $9.1 million profit (including substantial earnings contributions from the Crown Books and Trak Auto subsidiaries).
That was the last time Dart made any money, buffeted by the debt, management troubles and intense competition accelerating in the Washington area. Market share for all the drugstore chains started to shrink as supermarket chains and large-scale discounters, such as Giant Food Inc., grew strongly.
And Dart, with a reputation for dirty stores and poor service, was losing customers. "We purchased the company for a very high price and there is no room for a downturn," said Stephen J. Hansbrough, who ran the company then. Threatening bankruptcy, Hansbrough managed to restructure the debt in 1987 to lower interest payments, but saw that the company desperately needed some help fast.
Enter Bud Fantle, not a person who could sit on the sidelines for long, who had been rebuffed earlier in the year by Hansbrough. In late 1987 Fantle and other investors put up $8 million for a 20 percent stake in Dart, a rock-bottom one-fourth price from the original 1984 deal. At the time, bondholders and other creditors were thrilled to get Fantle's infusion of money and expertise.
And he was just as thrilled to be there -- Fantle was back.
"I did it twice and I am going do it once more time," an ebullient Fantle said at the time of the purchase. "I think Dart is a great opportunity. Their locations are good. Their people are good. ... It's fun to get back in the business. I missed it."
It may have been a great deal on paper, but buying Dart at any price was risky and times were much different than when Fantle was king of Washington's drugstore heap. Giant's drug sales, for example, had jumped to almost $600 million with its one-stop shopping approach, Peoples and Rite Aid were coming back and other companies were nibbling away business on the lucrative edges of the region.
The difficulty of turning Dart around was foreshadowed in a cartoon that Fantle was given at the time of the buyout by his investment bankers, picturing him and his son as "Washington's Drug Store Doctors," working side by side on the nearly dead body of Dart.
Many think Fantle should have waited until Dart collapsed into bankruptcy and then picked up the pieces. "Looking at that now, it seems like the right option," Fantle said. "But I thought it might be such a mess in bankruptcy that I would not be able to get everything I wanted. I couldn't wait."
So Fantle was in as chairman and chief executive, along with his son as president and chief operating officer. Jeffrey Fantle, 42, who like his father has a pharmacy degree, had worked with his father at Lane and Peoples and was, many say, a key reason for Fantle's desire to move fast in order to leave something behind.
Fantle "wanted Jeff to follow in his footsteps and I think it clouded his judgment," said one retailer. "He wanted to create a dynasty that would last beyond him."
Geraldine Fantle agrees. "He did this in a lot of ways for Jeff, because he felt that a father has some obligation to help his son along," she said.
"We made the decision together and wanted to control our own destiny," Jeffrey Fantle said. "It was the right thing to do for a lot of reasons."
Fantle said leaving something for his son was part of his motivation, but not all. "I would not say Jeff was the primary reason, but mostly what we wanted to do is reestablish a family-owned business and make it successful for everyone from my family to the family of employees."
The Fantles did some major surgery, deciding to recast the entire Dart image, creating a new store -- improving prescription service, adding high-end merchandise, cleaning up, selling some stores and downsizing others. The strategy was to put Dart into a niche that others in the area did not serve.
"We were looking to build a Nordstrom operation with a heavy emphasis on service, quality and new store design," said Jeffrey Fantle. "And we still think that strategy could work."
The changeover was best signaled in 1988 when the Fantles, along with a group of former top Peoples executives who followed Fantle to Dart, changed the store's name to Fantle's to complete the break with Dart.
Many retail observers thought the changes were necessary. "Bud had no other choice than to switch gears," said Chain Drug Review's Pinto. "Dart had a horrible reputation to deal with."
But at least one retailer thought such drastic changes were ill-advised. "When he put his name up there, I think it showed that rather than having a strategy that fit the store, he wanted stores to fit the strategy," said Robert Haft, whose father had started the chain. "The store had the discount image, it had the locations with low rents, 30 years of advertising -- if anybody had the low cost, low price and high volume, it was Dart. That's the niche Fantle gave up."
The new Fantle's strategy tested whether an upscale pharmacy with so many locations could be viable. But the chain needed money to make Fantle's bold ideas fly and that was in short supply, given the hefty debt and suppliers' nervousness over the chain's prospects. After executives unsuccessfully tried a $6 million stock offering, Fantle and his investors added $3 million more to the business.
"It got so that all we were doing was managing the finances all the time and we had no chance to do anything else," said George E. Loney, the chief financial officer.
There were other problems, including a Labor Department suit over the Dart pension funds, which was aimed at the previous owners but also involved the company; a shortage of pharmacists at all the branches; and stores in deep disrepair.
"The expectations of my investment bankers proved to be rosier than it turned out to be," said Fantle. "I should have looked a little closer at the whole thing. ... I did not realize how badly the company was slipping."
Sources have said Fantle saw the retail operation and thought he could turn it around, but failed to carefully scrutinize the balance sheet and to understand the implications of the hefty debt on the company's books.
Struggling to get a new identity, revenue plummeted and losses widened as Fantle closed stores and re-merchandised. In the first year under Fantle's team from late 1987 to mid-1988, Dart suffered losses of $24.5 million, down from a $1.8 million loss the year before, which would have been almost as bad except for an extraordinary $20 million gain from debt restructuring.
Revenue for that year dropped 18 percent, to $218.2 million from $265.2 million. Fantle attributed the loss to discontinued operations, the costly re-merchandising and the costs of the takeover.
The next year was worse. In July 1989, Dart reported sales of only $171 million because of the cutback in stores, inventory volume and other reorganization costs. The loss was a thudding $30 million.
Fantle looked for more ways to drum up cash, including an aborted attempt to make $37 million selling leases and renting back the space. Finally, unable to make payments to bondholders out of cash flow and worried that vendors were about to stop supplying stock, Fantle took the company into a Chapter 11 bankruptcy reorganization in August 1989, with the stated goal, after reorganizing the company's finances, of operating the company on a profitble basis.
The bankruptcy did not go any better and Fantle found himself in constant struggles with bondholders, vendors and others over what course to take. Fantle shopped the stores to all the major chains, but a slowdown in the economy and questions about the prospects for an upscale drugstore chain stymied all attempts to sell the chain.
"It needed infusions of at least $100 million to re-merchandise the stores, and who would want to put in that kind of money?" said Lewis Sosnowik, vice president at Koonce Securities Inc. in Rockville.
Finally, vendors and creditors forced Fantle's hand and refused to wait the three years he estimated it would take to turn the company around. At the end of last summer, Dart went into liquidation proceedings.
"Without money, you don't have time in this world," Fantle said. "Our vendors and creditors were looking at other failures like Circle K, Campeau and others, and it seemed that we were just not important enough to save. There was a cutoff line and we were under it -- they were willing to get what they could out of the corpse and then move onto greener pastures."
Fantle battled hard to ensure good severance and job-placement arrangements for his workers. He is in the midst of closing the chain, which should be out of business by December. "We gave it our best try," he said. "Life at Dart was tough, but it's much harder to die."
Still, Fantle has come out pretty clean from the wreckage of Dart, free from the debris that would bury other business executives who took a company into bankruptcy and then liquidation. Numerous competitors, analysts and retail observers absolve Fantle from any blame and most think he did the best he could under the dire circumstances.
Well, yes, they admit, the original buy was a mistake, but -- and this is repeated again and again -- if Bud couldn't do it, nobody could.
"The Dart acquisition was a courageous move and he did not succeed -- it was too much for a man even as good as Bud Fantle," said Ron Ziegler, president of the National Association of Chain Drug Stores in Alexandria. "So I've heard no nitpicking from anyone."
Those who have followed Fantle's career think it is not the last they will see of him. Even now, he talks about moving on and has already rented office space in Bethesda to start a new business, a consulting firm that will specialize in advising troubled companies. He talks excitedly about all the ideas he has for its name, finally settling on the calming Harbour Group.
Still, you wonder, watching Fantle with this animation that younger men would envy, where does it come from, the energy to get up again and again? Relax, one wants to say to him, put up your feet, do a little laurel-resting.
But that is not to be quite yet, and the reason is spelled out on Bud Fantle's wall in a framed, faded old letter, dated August 9, 1941, from a boss to a young employee.
"It is with great pleasure and pride that I increase your weekly draw $2.50. If you continue with the store your draw will increase monthly according to your individual showing and the store's progress. ... Make every hour count and make every day show something worthwhile accomplished.
"I want to thank you for your assistance in the collection of our accounts, window dressing, promotional activities and everything you have done as my virtual assistant. No father could have a finer son or business associate. You have progressed considerably for your age. We can both go far together.
Fantle surveys the letter quietly, something he has done many times over the years. "My father was really something," he said. "Really something."