Fashion has long been a glamorous industry that people clamber to join. But beneath the glitter, it's a tough business. Few in the fashion world know better than popular designer Rachel Roy how rocky the road can be for even the most successful.
Rather than show her latest spring looks during the recent New York Fashion Week, the 41-year-old entrepreneur was fending off a lawsuit from her ex-husband and business partner. Meanwhile, her designer label, which a former business partner shuttered without her knowledge in 2014, lay fallow.
Roy has an unusually high profile, even in fashion. In addition to being a designer known for dressing First Lady Michelle Obama, she was married to rap mogul Damon Dash and is a friend of reality-TV star Kim Kardashian. Her fame has won her notice as a role model to many a would-be entrepreneur, young and old. So it wasn't surprising when Roy was asked to speak at the White House's National Small Business Week in May.
Her discussion offered a glimpse of the obstacles she has overcome--and some she still struggles with. "You have an option to go the other way or dive into it. Any time you do that--any time there's fear, and you go through it--there's major success, at least for me," she told the gathering.
Roy's story is not only inspirational but also instructive for entrepreneurs of all stripes. She rose from immigrant roots up the industry ladder to become creative lead of her own multimillion-dollar women's wear fashion brand, and then endured a series of nasty breakups--first with her ex-husband and then with Jones Apparel Group, the fashion behemoth that licensed and marketed her creations. And despite those setbacks, she's still eager preach the gospel of entrepreneurship.
"I didn't go to business school. I learned through observation," Roy told me. "But how great would it be if we could start in elementary school?"
I met the statuesque beauty from Los Angeles in the lobby of the Washington, D.C., W Hotel, which plays electronica even at 11 a.m. It was early May and unseasonably hot. She wore a sleek black suit and die-cut, stiletto boots. "What do you think?" she asks, raising her pant leg to give me a better look.
Far from glamorous, Roy spent her childhood in working-class Seaside, California, near Monterey. Her father, an Indian immigrant, worked as a janitor to put himself through graduate school.
"Just having that responsibility of seeing family members in India, completely bottom of the caste, having those images as a child … where they literally burn little kids' hands together so they stick together, so that when they're begging they can get more money," says Roy. "I truly believe that I have the strength I do because I have gone through so much in my childhood, because I have seen so much poverty."
When she was 14, her father dropped her off at the mall and told her she couldn't come home until she got a job. She found work folding T-shirts at a nearby aquarium and found her way into a job at Contempo Casuals, the fast-fashion pioneer glorified in the 1990s teen comedy Clueless. She eventually became a manager.
"Had I not been forced to work, I would not know my work ethic today," adds Roy. "My father told me repeatedly, as early as 8 or 9, to realize I was living in a land literally of opportunity and that I could be the American dream--and start a business."
She studied psychology and English at Washington Adventist University in Takoma Park, Maryland, and moved to New York City after graduating. She worked for free for years as a stylist between clocking in at retail jobs at BCBG and Neiman Marcus Group.
Her big break came after she got fired from the set of a music video. The women she dressed--in tight pencil skirts, turtlenecks, and oxblood heels--weren't scantily clad enough for the producers, according to Roy. But she made a mark. "A few years later, someone remembered my aesthetic, and then hired me for Rocawear," she says. She had to start as an intern--in the mailroom.
Within about four years of cycling through departments, she became creative director of Rocawear's women's and children's divisions. "I was overseeing just about anything that had to do with women--from flip flops to little girls' socks to athletic wear. As long as it was for a female, it had to pass my eyes," she says.
But, Roy adds, she wasn't really designing anything. "We didn't make any female products in-house. And so I had to go from licensing outfit to licensing outfit, which is just a lot of schlepping around New York," she says. "You're mainly dealing with garmentos, not white-lab-coat artisans." Eventually, she got the company to consider raising its stakes--and come out with an in-house line for women. Yet while she was having the samples made up, the company got acquired.
She had to act. "I went through my Rolodex of seven years' worth of meeting people in the industry. I went out and I pitched all of them with this first tiny, little sample collection, and one of them wanted to fund it."
She refused to name that initial investor. She also declined to discuss Dash, her eventual business partner, with me. Dash is Jay Z's former manager and business partner at Roc-a-Fella Records. Roy and Dash married in 2005. That same year, the New York City-based fashion brand Rachel Roy was born. In 2008, the business formalized, under the name Royale Etenia LLC. Roy would maintain a 33 percent stake in the newly formed company, alongside Dash's roughly 47 percent. TSM Capital, an investment firm founded by Marvin Traub, the former CEO and chairman of Bloomingdale's, picked up a minority stake in 2007.
In 2008, Roy, Dash and TSM sought a joint venture with Jones, the publicly traded fashion company. In exchange for becoming a 50-50 owner of the joint venture, dubbed Rachel Roy IP Co. LLC, Jones agreed to develop and market the brand. It would also pursue global expansion of the wholesale business, introduce new product categories, and launch stand-alone retail stores in key U.S. and international locations.
The honeymoon lasted a while. After a fractious divorce in 2009, Roy and Dash engaged in what can be described as an ugly custody battle, which routinely triggered tabloid headlines.
In April, she won sole custody of her two young daughters. By the end of that month, however, Dash had served Roy with a $2.5 million summons with a formal complaint to follow in July. In short, the complaint alleged that she had mismanaged the business they started together. In August, Roy moved for a dismissal, indicating that Dash's claims were baseless. Dash declined comment for this article through his attorney Eric Howard, saying he is currently pursuing litigation against Roy.
The he said/she said notwithstanding, Roy's real business troubles arose from her partnership with Jones Group.
In 2013, Jones sought to sell itself to private-equity firm Sycamore Partners, and Roy's business wound up in the crosshairs. According to court documents, Jones claims to have lost millions on its investment in the Rachel Roy IP Co., which then consisted of the designer label, RR, and RACHEL Rachel Roy, a lower-priced line, exclusively available at Macy's. So to stem the losses, Jones moved to liquidate the designer division of the Rachel Roy brand. It also planned a $15 million sale of Roy's design trademarks to the New York City brand-management firm Bluestar Alliance.
How did she find out her business was going to be shuttered or sold? According to her motion for preliminary injunction, her staff was let go, and she was shut out of discussions regarding her company's fate, even though she was the brand's founder and artistic director. She was also barred access to her sample room.
"That was something very difficult that was put on my plate," says Roy, who acknowledged that her only recourse at the time was to take Jones to court.
The judge agreed to bar the sale, as Roy contractually held 100 percent creative control of her company. "The judge decided that yes, indeed, creativity means you may decide who you sell your name to," says Roy. "That win was huge for me." The Jones Group agreed to settle with Roy, and in December 2013 it announced its sale to Sycamore Partners for $2.2 billion, including debt.
While she could retake her company, she had another problem: She couldn't afford the multimillion-dollar price tag. So she needed to once again find a business partner. But she wasn't going to make the same mistake twice.
"By then, I knew that I wanted partners with shared values, people that believed in what I wanted to put out there," she says.
Today, Royale Etenia operates in concert with Topson Downs. The Los Angeles-based global apparel manufacturer owns 64 percent of the Rachel Roy IP Co., with Royale owning the remaining 36 percent. Dash and Roy maintain a 50-50 ownership of Royale. (TSM exited Royale in 2014.) With the new owners in place, the joint venture, dubbed RRIPIT LLC, is building out Roy's contemporary brand, as well as eventually reviving her designer brand, according to a 2014 release announcing the acquisition.
While Roy is on more stable footing these days, she doesn't whitewash her experience, or ignore the lessons learned.
"I think that comes from being born into a poor community. Because one thing you do have is pride and gratitude," she says, adding that you don't lose that perspective when things are going well. "When you have nicer things around you, immediately you have gratitude and pride."
"The great thing about being a small-business owner is that you can affect change," Roy told her fans at the White House. "Big businesses can't do that."