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A Tale Of Two Companies

There's more than one way to bake a cookie -- and build a business.
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David Liederman makes a remarkable soft-and-chewy chocolate chip cookie. So does Debbi Fields. Some people prefer one to the other.

Cookie eaters who enjoy large chunks of chocolate in a thin, very buttery cookie with just a hint of crispiness at the edges will buy theirs at Liederman's David's Cookies stores. Connoisseurs who prefer a more traditional chip in a thicker cookie -- still a bit doughy on the inside -- will patronize a Mrs. Fields Chocolate Chippery store. A cookie from David's can vary in size from large to small and in shape from circular to oblong. A Mrs. Fields cookie will always be round and within one-quarter inch of three inches in diameter. At Mrs. Fields you are encouraged to buy cookies still warm from the oven. At David's they won't sell a cookie until it cools.

This year, American snackers will spend at least $200 million on fresh-baked, soft-and-chewy, over-the-counter cookies, twice what they spent just two years ago and half what cookie makers expect them to spend next year. Liederman and Fields are both baking big batches of this business, but that is about all they have in common. For in addition to having distinctly different tastes in cookies, they have radically different notions of how to grow a cookie company.

Wheeler-dealer entrepreneurs will admire Liederman's franchising and licensing strategy. Apostles of corporate culture will applaud Fields's insistence on company-owned-and-operated stores. Automation fans will marvel at David's cookie production system, while the more idiosyncratic will appreciate the flexibility that Mrs. Fields gives its employees. People who appreciate cute corporate aphorisms, such as "Good enough never is," will love Mrs. Fields. People who are embarrassed by them can take refuge at David's.

After a point, greatness in a cookie simply comes down to individual taste. Maybe that is true of cookie companies, too. Debbi Fields couldn't run David Liederman's company for a day; but neither could he run hers. Their companies, like their cookies, reflect the individuals.

Walk toward the river on East 50th Street in Manhattan to a gray, four-story townhouse. In front, double-parked, is a chauffeured Cadillac limousine, a Sony television set built in behind the front seat. Within the house is one of midtown's rare private garages. Ring the bell, and when you have passed inspection over the hidden TV camera, walk through the garage and past the family Mercedes 300 TD station wagon to a two-room office area. One room, which is long and narrow, is filled with three or four people working at electronic office machines. The other, larger, room is filled with 35-year-old David Liederman -- you can recognize him by his bulk -- who is likely to be shouting shorthand into a telephone that beeps more or less continuously through the day. A typical Liederman conversation might be: "What . . . Yeah. . . . No. . . . Tell him Toronto is gone. . . . Yeah."

On Liederman's desk is a catalog from Marks and Spencer, the British retailing giant that soon will begin baking and selling David's Cookies in its London store. On a shelf near the desk is an album of photographs recording the recent opening of David's Cookies's first suburban Tokyo store. Liederman, in the photos, is all smiles.

In the office, he is on the phone again. "CBS Morning News" wants him, but, he says, he will call back. He is busy. He has to decide which of four competing bidders will get his Princeton, N.J., store, and he has a complicated European chocolate-buying and store-opening trip to arrange. An assistant brings in the day's batch of checks. He questions most, signs some, and sends the others back for one reason or another. His wife brings the baby, their second daughter, down for a kiss and a visit.

From here Liederman presides over the growth of his cookie empire. At the moment it consists of a management office on 42nd Street and a Long Island City plant that manufactures and ships cookie dough to roughly 150 (and growing) David's Cookies stores. Of the 150 stores, 31 are in Manhattan and are company-owned. The rest, spread unevenly across the country, either are owned by territorial franchisees or are operated by department store employees in such places as Macy's. The four (and also growing) Japanese stores are operated by Liederman's joint-venture partner, Nissho Iwai Corp.

There is a reason why the empire looks that way, and it reflects Liederman's view of how the business works. It has, as he sees it, two parts: First you have to make the cookie, and then you have to sell it. In both parts you want to minimize the probability of error. In Liederman's mind, that means either minimizing the number of people involved or, when that is not practical, supervising them as closely as possible.

In part one, you minimize the number of people involved. You do that by making all the cookie dough in a single nearby plant where you can keep an eye on the process. Then you chill it and ship it to the stores, where all an employee must do is put the dough on a baking tray, put the tray into an automatic oven, and collect it when the finished cookies emerge 7 1/2 minutes later.

Part two of the business -- selling the freshly baked cookies -- still requires lots of people, and you can't easily manage hourly counter help in Tennessee, for example, from a Manhattan townhouse. So you turn the retailing end of the business over to someone in Tennessee, a franchisee or licensee, whose livelihood depends on how well he or she manages.

"Anybody who tells you that the retail business is wonderful and exciting," says Liederman, "is out of his mind. . . . The realities of the retail business in any typical urban environment are not wonderful: the external robberies, the internal robberies, the motivation. You're dealing with kids who really are just passing through. . . . We have pretty good kids, but still we get these calls from Mrs. X who says so-and-so was rude. The kids are the Achilles' heel of retailing. . . . A very close frient of mine is executive vice-president in charge of operations for The Horn & Hardart Co., everything they run from Bojangles to Burger King to Arby's. I said to him, 'Define your job for me.' He said, 'My job is to keep my employees stealing as little as possible.'

"People problems. That's why I look for guys like [Cambridge, Mass., franchisee Jim] Bildner all over the country. Because if they're young and aggressive and they want to kill for the business, they'll be standing there, and that's much better than me trying to run a Cambridge cookie store out of 42nd Street, New York City.

"I have for about a year been sitting on what I consider to be some very, very good brownies. I can't introduce them, because I can't get the formula to a state yet so that all the employee has to do, like with the cookies, is open up a container, put the brownies in something, and bake them. With my brownies, you have to add eggs, and I am terrified of sending anything out there where an employee has to do anything to the food. . . . You have to think at the lowest common denominator. One of the reasons we do so well in the cookie business is that a chimpanzee could take cookies out of that bag and more often than not put them on the tray properly.

"One thing we talked about in Japan with my partners over there would be having a totally automatic cookie store. Do you realize there are totally automatic French-fry machines now?"

"We're a people company," Chirps Debbi Fields, "and what we're really selling a customer is a feel-good feeling." Liederman would gag on the phrase.

Fields is a wasp-waisted, clear-skinned, 27-year-old, three-time mother with the kind of irrepressible California cheeriness that gives the average New Yorker -- David Liederman, for example -- a migraine. "That airhead," he calls her when he is especially riled. "She," Liederman maintains, "is really he. Randy Fields [Debbi's husband] runs Mrs. Fields Cookies. Debbi Fields is a nice, good-looking blond who doesn't make any business decisions at all." Debbi Fields, for her part, wouldn't dream of calling Liederman a name, not publicly, anyway.

At Mrs. Fields's corporate offices in Park City, Utah, high in the ski country 40 minutes east of Salt Lake City, the same phrases keep popping up. "Good enough never is," a half-dozen people will say. "Having a Mrs. Fields experience" is what people there say when they mean eating a cookie. Even chief operating officer Taylor Devine, a mature, dignified New Englander, a veteran of strategic-planning consulting at Arthur D. Little in Cambridge, Mass., discussed "feel-good feelings" over dinner-sober, in a public dining room. The marketing manager was the first of several Fields executives who said, "We're all high on energy here."

Even for a non-New Yorker, all this happy talk takes a little getting used to, but there is no doubt of its source. "I'm the heart and soul of the company. That's my job," explains Fields, a woman whose apparent niceness would trouble even the credulous. "Sometimes," she says, "when I'm frustrated or disappointed I think, well, maybe I haven't done enough good things. . . . So I do something nice for somebody and I snap right out of it."

"This sounds stupid," says Randy Fields, 36, a businessman who has made a lot of money in oil, venture capital, and financial consulting to Fortune 500 companies, "especially to a businessperson, but she succeeds because she is a good person. I've seen her stop her car and help a little old lady carry her groceries. . . . I absolutely swear that she is exactly what she appears to be."

She appears to be in charge of a company that started in 1977 with a single cookie store in Palo Alto, Calif., south of San Francisco, capitalized with $50,000 borrowed from Randy. This year the company will generate sales of at least $45 million from 300 (by year's end) cookie stores across the country and in Singapore; Sidney, Australia; and Hong Kong. Each one of the 160 current stores is company-owned, and every cookie is sold by a Mrs. Fields employee. There are no licensees or franchisees and no plans to bring any into the fold. Inquiries from the 7-Eleven chain of convenience stores were turned away. Mrs. Fields recently declined a joint-venture offer in Japan and will handle its own expansion into that market.

Mrs. Fields, unlike David's, doesn't mix its cookie dough in a central plant. Instead, store employees combine ingredients (some in proportioned containers) that are shipped to the store by independent distributors under contract with the company. Nor are the store ovens automatic. Employees must put the raw dough in to bake and remember to take the finished cookies out. "I don't know how long they bake," says Colleen Clifford, who works at a Salt Lake City Mrs. Fields store. "You just know when they're done."

Like David's, Mrs. Fields does no national advertising, relying instead on store location and word of mouth to generate sales. But Mrs. Fields employees don't wait passively for cookie buyers to come to them. Jennifer Dyer, another Salt Lake City store employee, took upon herself the design and construction of a countertop promotion display for Easter gift certificates. Later, she headed out into the mall to chum for customers with free cookies.

Two vice-presidents for operations at the corporate level oversee 6 (eventually 10) regional operations managers, each of whom is responsible for about 30 stores. Store managers, some of whom may manage 2 or 3 stores, get help from team leaders, selected from among the hourly employees. Everyone but hourly employees attends training school in Park City. Everyone in the company, even secretaries at the corporate offices, gets working experience in a cookie store, and not just at the counter. Stan Slap, one of the vice-presidents for operations, went with Debbi Fields to visit a San Franciso store soon after he joined the company."We went in. Everything looked fine, but people were really busy, so Debbi said, 'What can I do to help?' The manager said, 'Well, the back room is a mess.' So Debbi and I spent the next two hours on our hands and knees cleaning the back room."

Before being hired by Mrs. Fields, candidates get the customary interview. In addition, they frequently get auditions before audiences of other candidates and employees.Natural hams have a leg up on competing job applicants. "We want people to be outrageous," Fields says. "We want people to be themselves. . . . We don't tell people that they have to be pleasant. We tell them that we want them to have fun. We tell them that they have to greet customers. We don't tell them how they have to greet customers." At a San Francisco Mrs. Fields, Chrissy Woodward sometimes attracts people by tossing out free cookies, then leading the assembled crowd in Mrs. Fields cheers.

Chrissy: "And how MANY do you buy?"

Crowd: "A DOZEN!"

Chrissy: "Oooh-wee."

Crowd: "OOOH-WEE!"

Hourly employees collect the minimum wage and participate in the staff commission fund, a percentage of sales recorded by their respective stores, which is paid monthly. Everyone else, from team leaders up, gets bonuses that reflect sales and individual performance.

A daily profit-and-loss statement is generated for every store, but store managers don't see them. "Store managers can't be profit-driven," says Randy Fields. "They have to be driven by sales and by making people happy. If they had access to the P&L, would they take the cookies off the rack after 2 hours?" Two hours is as long as a Mrs. Fields cookie is supposed to remain unsold. (At David's the advertised limit is 12 hours, but while Mrs. Fields promotes its warm cookies, recall that a David's cookie is a cool cookie.)

"Mrs. Fields cookies," says Debbi Fields, "is an extension of how I see the world. I believe people will do their very best, I really do, provided that they are getting proper support. . . . Sometimes I've gone into a store, and we haven't had soft-and-chewy cookies, and I've shut the store down. I'm known for doing that. They have to be perfect. There's no word at Mrs. Fields for 'it's good enough.' I'll go in and throw away $600 worth of product. I don't think about what I'm throwing away. . . . I just assume that there's been some reason why the people were not taught what the standards of the company are.

"So I'll say, 'Okay, let me explain. These cookies are not perfect, and we have to have perfect cookies. That's the goal.' I'll take a cookie from the sheet and I'll say, 'Eat this one. Do you see that it's crunchy?' And they'll say, 'Yes.' I'll say, 'We don't sell crunchy cookies. What we sell are fresh, warm, and wonderful cookies. So, let's remove these from the shelf and let's go make a batch.'

"The reason why I know when a cookie is overbaked is because I've overbaked them. I know when one is underbaked because I've underbaked them. I've been there. I understand these things. And therefore I'm there to teach [the employees]. I'm their support system. We do it together, and we start feeling good about what we're doing.

"It's a people company. That's what it's all about. . . . Mrs. Fields is in the business of selling cookies, but that's just what the customer believes. What we really to is . . . we take care of people.

"You say that people come to work for money, and I disagree with that. Money is part of a whole picture. People come to work because they need to be productive. They need to feel like they are successful in whatever they do. . . . Money is not the issue. I don't know if giving them stock in the company would change anything.

". . . You make the cookie and you're standing there and you sell the cookie. You put it over the counter and this person says, 'This is great, this is better than homemade, this is . . .' whatever. And that fuels the individual to do a great job, because he doesn't want to let that customer down. Now, I don't know how many times a customer stands at the counter saying, 'God, this is the best McDonald's hamburger I've ever had,' but they do it all the time at Mrs. Fields. . . .

"I'm not brilliant. I am not brilliant. But I do understand one thing, and that is feelings, and emotion, and caring. You know, everybody likes to be made to feel special and important. They liek to be acknowledged. That's my real role. To make people feel important and to create an opportunity for them. That's really my role as the cookie president, the cookie person.

"I knew what I was really good at. I make great cookies; that I really do well. And I'm really good at dealing with people. So I fulfill my needs every day, because I do what I like to do. But there are some things that I am just not a whiz kid at. I am not great with numbers. And so I thought, well, understanding my limitations, I need superstars. . . . I have surrounded myself with superstars. And they know it. . . . I do rely on Randy's expertise with numbers because he's so good at it. . . . I would be foolish not to."

David Liederman is tired toward the end of another frenetic day. "This may have started out as a joke," he observes with uncharacteristic seriousness. "It's no longer a joke." He had spent several hours at the Long Island City cookie dough plant testing a new, smaller oven that would occupy less space in the freestanding David's Cookies outlets in supermarkets, in department stores, and -- a hot possibility -- in ballpark and sports-arena concession stands. With a needle-thin probe he had taken the internal temperature of each test batch as they came out of the oven. They were about 190 degrees, not well-enough baked for him. "Of course, at Mrs. Fields, they come out 145 degrees," he said. "How do I know that? What, you think I don't have people working in her organization?"

Everything doesn't always work right for the customer at either David's or Mrs. Fields. David's 42nd Street store in Manhattan sells sandwiches as well as ice cream and cookies, but the traffic flow is a confusing mess. You can't buy a cookie in the sandwich line; to get a cookie and a sandwich, you have to stand in two lines. At Mrs. Fields's Brookline, Mass., store, the cookie person behind the counter one day was as helpful and friendly as the average city bus driver. Having a Mrs. Fields experience there may not be a treat.

David's and Mrs. Fields compete, but not head-to-head yet. The market for high-quality, premium-price, over-the-counter, hand-dropped, soft-and-chewy cookies is too big and growing too fast. "We're in a race," Liederman says, "but we're both going to win. It's comical to me that all we're both doing is selling pretty good cookies -- in my case very good cookies, in her case pretty good cookies. . . .

"The problem with the cookie business is that there are four companies that are all trying to be the McDonald's. Which is not to say that Wendy's and Burger King don't make a living, but to be the clear-cut leader you have to have stores, outlets, and there's not a cookie company in the United States that has more than 160 now. By way of comparison, Baskin-Robbins has 3,200 stores. There are nine domestic ice cream companies that have more than 300 stores. The cookie business is just starting, and we're all running around like chickens with our heads cut off picking up one location at a time. At the rate we're going, it's highly conceivable that [David's] could have more stores in Japan than in the United States, which doesn't mean we won't be doing well in the United States, but it does mean that we will not have been able to get the big deal. We're talking about 7-Eleven or maybe a supermarket chain that can open up 300, 400, 500 outlets at once."

"Oh," says Fields, "you're going to ask me those questions like . . . See, that's one of the reasons I don't read those corporate-strategy books. Most people will ask me, 'Aren't cookies a fad? Isn't there a saturation point? Isn't there a product life cycle?' I think that's all baloney. My view of the market is quite simply: Are our cookies incredibly fabulous? Yes. Do they make people happy? Yes. Are they as good as homemade? In my opinion, yes. Do people love to eat them? Yes. Are they going to give up the things they love to eat? I think that's very doubtful. . . . I mean, really, if something is fresh, warm, and wonderful and it makes you feel good, are you going to stop buying cookies? You grew up with cookies. Your mom made you cookies."

"Check this out," says Liederman. "Go pick 10 people off the street. Ask them when's the last time they had a piece of apple pie and when's the last time they had a chocolate-chip cookie. Ninety percent will say they had a chocolate-chip cookie since they had a piece of apple pie, and what is more American than apple pie?"

Both companies are adding noncookie products to their retail repertoires. David's New York stores carry ice cream, and Liederman promises to start "the biggest ice cream war this city has ever seen" this summer. "Buy a pound of my cookies, and I'll give you a cone for 25?. What's Haagen-Dazs going to give away?" Most Mrs. Fields stores have introduced a fudge-type brownie and something called a Mrs. Fields Frost-Bite: vanilla or chocolate mousse sitting on a base of crushed cookies, all dipped in dark chocolate and then frozen. Fields says the company may go into the candy retailing business in a new, separate chain of stores. There is a strong possibility, she says, of introducing Mrs. Fields brand products into supermarkets, but the products won't be cookies.

Both companies are opening more stores. Each expects to have twice as many outlets by year end as it did in early 1984, even without Liederman's "big deal." Unlike American steel and automobiles, American cookies sell well overseas. David's, says Liederman, will be in 10 more countries by December. "My Japanese partner wants the whole Far East perimeter. They want to buy a few franchises in Oregon, open up western Canada.'And while we're at it,' they say, 'why not sell us a couple of stores in New York. 'You don't have to be a brain surgeon to see that sooner or later I'll be learning to speak Japanese, and I'm not sure I want that right now.

"You know what? There's still no plan. The plan is I want to get hundreds of stores open . . . and to maintain controlling interest in the company. How do we get there? I don't have the answer to that. Maybe I should marry Debbi Fields."

Last updated: Jul 1, 1984




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