GILROY
– The owners of the city’s newest and largest furniture business
pleaded their case before City Administrator Jay Baksa Wednesday,
who will cast a decision about whether the controversial business
will retain its business license and right to operate here or lose
it for violations of the city’s pl
anning laws.
GILROY – The owners of the city’s newest and largest furniture business pleaded their case before City Administrator Jay Baksa Wednesday, who will cast a decision about whether the controversial business will retain its business license and right to operate here or lose it for violations of the city’s planning laws.
Allegations of harassment from business competitors and threats of potential legal recourse have swirled around the debate over the 180,000-square-foot 5-Day Furniture store at 500 E. Luchessa Ave., which opened for business around the New Year.
Co-owner Hai Tran has complained that several Gilroy police officers reportedly showed up en masse at the store to issue citations.
Meanwhile, observers have said they witnessed a plane towing a 5-Day advertising banner circling the area where competitor Rosso’s Furniture sits on Monterey Road several times, as if singling out the location.
The city and the business laid out their cases in legal formality Wednesday in the City Council Chambers as over a dozen yellow-jacketed Five-Day Employees looked on.
Gregg Polubinsky, a city planner who acts as the city’s zoning code enforcement officer, told Baksa and Deputy City Attorney Jolie Houston Wednesday that the city has “reasonable cause” to believe the store is operating as a retail and not a warehouse use and recommended revocation of its business license.
Polubinsky said city planners warned store officials that the business must be wholesale with retail only as an “ancillary” use, typically 10 percent of sales but a maximum of 25 percent of sales.
Although the industrial zoning of the area allows warehousing, assembly and manufacturing businesses, it prohibits retail uses. Five Day officials said they would operate primarily as a wholesaler, but told officials they wanted to occasionally sell overstocked or damaged goods through a retail operation.
However, Polubinsky after receiving an anonymous complaint – the source of which city officials have declined to reveal – officials investigated and found signs of retail use. They included a large, open showroom with merchandise unboxed and on display with permanent price tags.
“It did not look like a typical warehouse with boxes inside,” Polubinsky said.
Meanwhile, the store took out newspaper and radio advertising touting it as “the region’s largest furniture store” as well as the plane flying over the city, he said. Signs advertising the business and directing drivers to it also appeared on city streets without proper permits, Polubinsky said. They were removed at one point but were then reinstalled.
Advertising is not consistent with a warehouse use of the building, he said, nor is being open to the general public, Polubinsky said.
“It’s functioning not as a warehouse, but as a retail (business) open to the general public,” he said.
But Tom Griffin, an attorney representing 5-Day Furniture, told Baksa and Houston that city officials don’t seem to understand the company’s business plan.
“In (context) of the business plan, this retail use is ancillary – and if it’s ancillary, it’s permitted,” he said.
Five-Day’s parent company manufactures furniture in China and ships it to America to sell it directly to major companies such as Macy’s department store, Griffin said. But if store or market conditions change while the furniture is in transit, the company can’t ship it back and needs to be able to liquidate it. The Gilroy store is the “escape-hatch” mechanism to do that, he said.
“The pieces there are only there because a container has been rejected,” he said.
Griffin estimated the parent company does roughly $1.2 million in gross overall business through the West Coast a month, but estimated retail sales from the Gilroy location have ranged from $128,000 to $210,000. That makes the Gilroy retail “considerably less” than 15 percent of the overall business, he said.
The Gilroy warehouse also sells furniture to “mom-and-pop” type stores and has to take furniture out of boxes to display it, he said.
“The business plan does not make retail the primary (business) of Five-Day Furniture,” he said. “It’s the very smallest component of their business.”
Griffin said such information on 5-Day’s number of customers and transactions should have been considered previously.
Griffin also said he was also “troubled” with the city’s use of advertising as evidence of wrongdoing. To rely on that would be a clear violation of commercial speech rights of the company, he said.
“They have a Constitutional right to advertise,” he said.
Griffin’s presentation was studded with multiple allegations that the dispute has arisen because other furniture stores don’t want the competition, although he maintained the business is not a direct competitor. For example, he questioned how police could respond with citations less than a half-hour after signs were posted for the business.
“It again suggests or hints at some reason or other why this business is getting special attention,” he said. “This business is going to be challenged at every step.”
While the city is cracking down on Five-Day Furniture, it’s allowing several other retail-type businesses in the area such as a trucking sales operation, Griffin said. Many surrounding businesses have written letters in support of Five-Day Furniture, he said.
“There’s nothing inconsistent with what other businesses are doing in the area,” he said.
Roughly 3,000 people have also signed a petition supporting the business, Griffin said, but he did not produce the petition during the hearing.
Anthony Rosso of Rosso’s Furniture, who watched the hearing from the audience, said afterwards that his business wants the city “to treat everybody fairly.” To say 5-Day is not a retail operation is “really stretching it,” he said.
“If they want to open up a retail operation, there are retail spaces available,” he said. “We don’t have a problem with that. We just want to be playing on fair ground.”
Rosso said allegations that existing stores are interfering with 5-Day Furniture’s existence are “crazy.”
“I don’t know when we’ve ever said anything about any furniture stores that have come in, and I believe there have been over 20 stores that have come in and out of Gilroy,” he said. “I don’t ever recall us approaching City Hall.”
Baksa has 30 days from Wednesday’s hearing to issue a written decision whether the store’s business license should be revoked or modified. The store is allowed to stay in business during the meantime.
Baksa said he intends to issue a decision “much sooner” than a month’s time.
“Everyone wants to finish this up and move on,” Baksa said.
Tran has threatened to take the matter to court or pursue a grand-jury investigation if the business is denied.
