Rosenthal and his team believe that, having stopped and put in place those changes, they're now in a position to take on the next stage of growth with more steadiness. "We know the concept works well, we know the acceptance is excellent, and we know it can be a bigger company," Rosenthal says. The executives' roles are better defined. A bonus program for store managers and assistant managers is in place. The company's deli and bakery products are updated regularly, its role in the community is solid, and its operations and new computer systems are helping track inventory, sales, and margins better (although the four partners -- addicted as they are to the beepers and cellular phones that keep them in touch throughout the day -- are unapologetically computer illiterate).
The company carries $900,000 in bank debt, which the owners don't think is excessive for a company tracking at more than $17 million annually. They are assuming that one day Saint Louis Bread will go public. For now, they're content to focus on expanding some more.
"How big, I don't think we can say, and I don't think anyone has visions beyond maybe a couple years down the road," muses Rosenthal, sitting across from a framed quotation by Calvin Coolidge about persistence being the root of success. "We sort of know where we're going immediately, and we know that the challenge is, How well can we do it outside of the St. Louis market?"
The first franchise opened this past June. The owner, Jim Magers, has 17 years' experience in restaurants as both a franchisee (with the 130-unit Penguin frozen-yogurt chain, in California) and as a franchiser (as an operations manager with a company that owned 70 franchises), and says it was the concept that made him put in the call to Ken Rosenthal. "We knew, from watching Saint Louis Bread in St. Louis, that they were doing very well -- even before talking to them, we could tell their sales volumes were high." Saint Louis Bread's sales per square foot average $404; the industry median is $177.
By 11:30 a.m. on a weekday, Magers's Springfield store is packed, with a line out the door. Baking here, as at all the shops, started around midnight and continues until about 11 a.m. Like most units, the shop opened at 6:30 a.m. and would stay open until 8 or 10 p.m. "Foolishly," says Magers, "I invested in a security system. We're closed for only about an hour a night." It takes 45 employees to run the cafÉ: seven in the back, baking, the rest out front. Walking through the store, chatting with customers, Magers taps at breads to check the crusts. (He himself bakes two nights a week.) His commitment is to build six units in all. In his second month he'd already begun looking at sites. By its third month, the Springfield franchise had become the third-highest-volume store in the system.
Back in St. Louis, the company has two three-inch-wide loose-leaf notebooks (A-L and M-Z) filled with 400 inquiries from potential franchisees. But the owners want some time to watch the ones already in the loop before making more commitments. They say the bread can go 500 to 700 miles from the plant before freight becomes economically disproportionate. "There's a big Midwest," says Klevens. "We'd like to be kind of the itsy-bitsy spider -- here's St. Louis, and here's someplace else, here's someplace else, and sort of link them all up."
SAINT LOUIS BREAD CO. TIME LINE
June '86
The big idea "Friends ask, 'Why in the world a bakery?"
Take first of six three- to four-week trips to San Francisco
Jan. '87
Begin paying for tutoring and recipes
June '87
Make final purchase of used equipment
Have start-up capital: $350,000 from savings, second mortgage, and SBA loan ($125,000)
Open first store"We were in a very forgiving neighborhood."
Give daily leftovers to church groups for food pantries
Begin to track daily cycles, develop forms
Jan. '88
Get kinks out of bread production
Jan. '89
Open store number two
June '89
Fiscal year ends. Revenues, $973,300; net margin (pretax), 3.8%
First partner joins
Move to central baking plant "I truly felt we would never use all the space."
Jan. '90
Linda Rosenthal leaves day-to-day operations
June '90
Open store number five
Fiscal year ends. Revenues, $2.8 million; net margin (pretax), 1.4%
Second partner joins
June '91
Fiscal year ends. Revenues, $5.8 million; net margin (pretax), 1.7%
Hire CFO
Change fiscal year. Six-month revenues, $5 million; net margin (pretax), 4.5%
Jan. '92
Hire MIS chief
June '92
Begin two-month strategic planning "It was time to take a break."
Name a new CEO and president; hire director of store operations
Fiscal year ends. Revenues, $13.3 million; net margin (pretax), 5.6%
Jan. '93
Open store number 17
Create first marketing budget
Begin putting together outside advisory board; name internal associates' advisory board
June '93
Open first franchise, in Springfield, Mo. "The challenge now is, How well can we do it outside the St. Louis market?"
