Video Transcript

00:00 Steve Abrams: I'm Steve Abrams, the owner and CEO of Magnolia Bakery. The owner of Magnolia is someone I met in my country house, in the dinner party circuit. We got into a conversation once about my possibly getting some franchise rights, let's call it, a licensing right. About three or four lunches into the conversation, she turned to me one day and said "Would you be interested in buying the whole thing?" the whole thing consisting of the one store in Bleecker but I knew what that whole thing could really be. And I am a serial entrepreneur. I've been doing this since I'm 18 years old, starting businesses, trying to find that magic bullet either to create or buy as an entrepreneur, I knew that this could be a really good business for me.

How did you plan to grow Magnolia?

00:49 Steve Abrams: My original vision for it was that I would open three stores a year. There would be very similar to the one you're in, neighborhood stores in neighborhoods throughout the country. Be a slow roll out, become part of the community. We bake everything fresh, so it's hard to do a very big roll out because we have a lot of training to do, consistency issues. And then we opened in LA, we didn't feel that as a business model, the small neighborhood bakery, us going into neighborhoods, we didn't really understand as much as we do in New York, was not the appropriate way to go into another city. Geographically, culturally and from a capital point of view, it's daunting. You can't... I could barely go to LA and find my footing and I have been to LA 50 times.

01:36 Steve Abrams: So going to Japan or Dubai or Morocco and trying to find a good location or trying to negotiate that lease while getting that store built, would be ridiculous. When I'm in Turkey, the Starbucks is a franchise. If you go to Japan, it's a franchise. Everyone, no matter who it is, out of this country, is franchising. Seeing that the roll out of the way we were envisioning it originally wasn't gonna be appropriate just domestically. And internationally, its use or lose. So, the world's very small. If we just... We weren't really thinking of going international but if we didn't, everyone would start opening Magnolias. It would get very confused in the mind. We would be tainted with it because no one is going to do it the way we do it. And we realized, there was enough demand there that it was time to start thinking about it.

How will you preserve your brand as you increase your franchises?

02:29 Steve Abrams: As a franchise, and this is why McDonald's is so successful, the agreement can be written as tightly as you want it. So we retain the right to design every store. We want it to be the quintessential American bakery. Same thing with the food. We go to people and they go, "Well, we like this type of treat here, can we put that in the bakery?" No. If you want to do that you could open your own bakery; you don't need to get Magnolia. We want to have the same look, the same taste, et cetera. It's very hard to do. That's why we don't feel we could be 5000 stores. So when we found we could find partners like that, that are willing to do it, then we could do this properly. But maybe it'll be 150, 200 stores worldwide. We don't want to cannibalize our own sales and we want to keep the exclusivity.