In October 1987, sailing on a $10,000 marketing campaign consisting of a 50,000-postcard mailing (the only explicit marketing the company would do until 1993), and with Ken, Linda, and 15 full- and part-timers at the helm, Saint Louis Bread Co. opened its doors.
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On-the-job learning: October 1987 to January 1989
"We made lots of mistakes, but we were in a very forgiving neighborhood," says Rosenthal. The product took a while to perfect: if a loaf of bread turns out to be doorstop material, it's hard to pinpoint what in the process went awry -- maybe the mixer put in the wrong ingredients, or maybe someone put the dough in the cooler too early. The Rosenthals invested in an expensive espresso maker, even though cappuccino quaffing wasn't even close to a rage. "We wanted to make sure that when coffee did hit, people would look at us as being at the forefront," Rosenthal says.
At the same time, the company's community image began to take shape. The Rosenthals decided not to sell day-old bread, in part so that customers would have no question about freshness. Instead, the company began a relationship that continues to this day with church groups and Operation Food Search, an organization that picks up and delivers goods to food pantries in St. Louis. From day one, the store gave away all its leftover bread each evening.
Within a few months, Saint Louis Bread had a regular clientele. The good part was that the Rosenthals were getting orders for bread. The bad part was that they were still figuring out how to fill them. Two months after the company's launch, they completely misjudged their Christmas sales. "We didn't know what we didn't know," says Rosenthal. "To make a long story short, we thought we had five hours more than we did, but everybody showed up for their bread orders at 7 a.m. We weren't ready for them. It got to the point where the counter people wouldn't go out front." That was the day Rosenthal started documenting things: what times of what days got busy; how much product was moving when.
In an attic crawl space above the baking area, the Rosenthals crafted an office. (An exposed pipe at forehead level was wrapped in towels to keep people from getting knocked out.) There the fiscally conservative Rosenthal, loath to string along suppliers, paid his bills as they came in. He also resisted bringing in equity partners, determined to finance through cash flow and whatever bank debt he could muster up. It often was not easy. "I lived," he admits, "in constant fear that we weren't going to succeed." Sales the first nine months were $245,600, almost at break-even.
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The first expansion: January 1989 to June 1990
By late 1988 the Rosenthals felt ready to expand. They picked a site in funky University City, just west of St. Louis. The spot was too small to have its own full-scale production, so the first store trucked over partially made bread. The bread would still be proofed -- the prebaking process of humidifying the dough to make it rise quickly -- and baked on-site. That store opened in January 1989. Eleven months later, with bank debt covering about half the $300,000 start-up cost, Saint Louis Bread opened a third store; stores four and five came in April and June of 1990, also half financed by loans.
The product mix was now stable. The company's public personality was being shaped by having stores that reflected the "personality" of their locations (college-area shops, for instance, have blond wood floors and more small tables, for a cafÉ feel) and by expansion of the company's charitable programs into fund-raising for local schools.
Attention to operations was the critical focus at this phase of growth. The Rosenthals got hooked up with Stern Fixture Co., an equipment-supply company, which helped them think about more efficient ways to design their deli operations. "Sandwiches were something they were doing as an adjunct to their bread business," says Mal Dardick, a designer and the chairman of Stern. "And we said, 'What are you going to do if everybody likes the product and they all come at once and you can't turn the food out quickly and cleanly?' We helped them think about better layouts for mass production."
In the fall of 1989 the company moved its mixing and shaping operations to a factory, another significant step. The first stage of baking could be done there, and then the goods could be trucked out. Taking on the space was a commitment to expansion: the plant was 12,000 square feet, and Saint Louis Bread needed only 3,000 of that. "I truly felt we would never use all the space -- all you could see was space," says Rosenthal. "We'd gone to the next plateau, but we were at the bottom of it."
Saint Louis Bread also began filling out its executive ranks. After the fourth store opened, Linda Rosenthal left the day-to-day management to care for the couple's four children, though she has continued to be involved in store design and product development. Shortly before that, Doron Berger, a neighbor and confidant, had joined as a partner, working on regulatory compliance and purchasing. In 1990 Myron Klevens, another old friend with extensive experience both in real estate (he was a local developer) and in management (10 years at $7.7-billion Emerson Electric) came on, also as a partner. Both Berger and Klevens, now 45 and 50, put in nominal amounts of cash -- along with commitments of sweat equity -- for 17% equity each. A former employee of Seattle-based Starbucks Coffee Co., the coffee retailer and cafÉ chain, joined Saint Louis Bread to beef up its coffee purchasing and brewing training.
