Great Harvest Bread Company

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Great Harvest Bread Company

28 South Montana Street
Dillon, Montana 59725
U.S.A.
Telephone: (406) 683-6842
Toll Free: (800) 442-0424
Fax: (406) 683-5537
Web site: http://www.greatharvest.com

Private Company
Incorporated: 1976
Employees: 1,200 (est.)
Sales: $60 million (1999 est.)
NAIC: 53311 Lessors of Nonfinancial Intangible Assets (Except Copyrighted Works); 311811 Retail Bakeries

Great Harvest Bread Company is known for baking great whole wheat bread and for following unconventional business strategies. There are about 150 franchised Great Harvest bakeries across the United States, and much has been made of the company as a “learning organization,” its network of franchisees free to innovate and communicate.

A Business Based on Lifestyle

Great Harvest founders Pete and Laura Wakeman met as children in Durham, Connecticut. As a teenager Pete was sent for two years to finish high school in Deep Springs, California. There he became the school’s resident baker, having learned how to make bread from an aunt. Pete and Laura began baking bread for money in 1972 to help pay for college, using an antiquated, water-driven stone mill to grind the wheat. They called the operation “The Happy Oven,” Pete recalled in Tom McMakin’s book Bread and Butter.

The Wakemans’ studies at Cornell University were ideal for the career path they would later follow. Pete graduated with a degree in agricultural economics in 1974; Laura earned a degree in nutrition a year later. Pete worked for a year on a dairy farm during his Laura’s last year in school. After graduating from Cornell, Pete and Laura married, settling in Montana after hiking 500 miles between Yellowstone and Glacier National Parks. There they bought an existing bakery in Great Falls, and the unorthodox methods of the Great Harvest Bread Co. began to take shape.

A cardinal rule of conventional baking they abandoned was the early starting hours. After three weeks of getting up at 3:00 a.m., they allowed themselves to work later in the day, which put the sights and smells of making fresh bread in front of the delighted customers. They also addressed the problem of burnout early on by not working weekends and keeping time cards to prevent themselves from working too many hours. However, it was the traditional, even anachronistic baking practices they followed that proved the most effective way of drawing customers. The Wakemans’ started with spring wheat from Montana, stone ground every morning. This helped give the bread a shelf life of up to 12 days at room temperature. The dough was kneaded by hand and sweetened with honey or molasses instead of refined sugar.

Franchising in the 1980s and 1990s

To market their bread, the Wakemans gave out samples, warm from the oven. In 1978, someone asked the Wakemans for a franchise, beginning the proliferation of Great Harvest bakeries across the country. In 1982, the couple sold their Great Falls store and moved south to Dillon, a three-hour drive, to live and work as franchisers. After a few years of assisting with all the store openings themselves, the Wakemans hired Ray Potter, who held an M.B.A., in 1988. In early 1992, however, Potter and two other trainers left the company in an event company COO Tom McMakin refers to as the “great upheaval.” Great Harvest later sued one of the three for allegedly starting up a competing bakery using the company’s trade secrets.

By 1995, Great Harvest had 93 outlets in 33 states. The business was growing an average of 25 percent a year, fueled in part by the habit of giving walk-in visitors a free slice of whole wheat bread—accompanied with butter, if desired. A couple of stores in Wisconsin were giving away 50 loaves of free slices every day. Another store in Kansas gave away more than 700 loaves, one per customer, on its opening day. Bakers also made donations to food banks.

Sound business practices were also critical to the chain’s survival. Founder Pete Wakeman particularly stressed the importance of remaining as free of debt as possible. Due to his desire for free time, he was also fond of creating checklist-driven systems that allowed the stores to function with a minimum of input from the owners. Money magazine reported that at this time, store owners paid an initial $24,000 franchise fee, while setup costs ranged from $100,000 to $300,000. Franchisees were protected from cannibalization (diminution of business by competing franchises) within a 16-mile radius during the first year and a half of operation and an eight-mile radius thereafter. Great Harvest received 7,500 inquiries for the 15 new franchises it signed on in 1994.

Great Harvest insisted that its owners be operators as well in order to insure the quality of the bread. Laura Wakeman told a trade magazine that baking was more difficult than most franchises due to hands-on work and the greater number of variables, since wheat and yeast were living organisms. “They have to have a feel for the bread,” she said. New owners, in fact, were bound by a “one-year apprenticeship.”

Apart from these requirements, the trade press reported, owners had unprecedented freedom among franchises. “Be loose and have fun,” began the company’s mission statement. “ANYTHING not expressly prohibited by the language of this agreement IS ALLOWED,” read the contract. Some owners operated their stores as delis, while others kept their offerings to the basics. The smallest store—the only one owned by the company—was located in Dillon, Montana, at the 258-square-foot site of a former one-hour photo shop. The microbakery performed nearly all of the functions of a regular store, with the exception that milled flour was shipped in daily. Variations among the products sold by Great Harvest included Oregon Herb, Cinnamon Raisin Walnut, Cheesy Jalapeno Cornbread, Cranberry Orange, and Cracked Pepper Parmesan. Prices ranged from $3 to $5 a loaf. There were also chocolate chip, oatmeal walnut, and oatmeal raisin cookies. Owners often made an effort to inform customers about their products, such as sending recipes and product news to “bread zealots.” Such sharing of information may have exposed Great Harvest to the danger of leaks to competitors, noted the Wall Street Journal; however, Pete Wakeman believed that due to his group’s rapid rate of innovation, “They’ll be left holding a blueprint of what Great Harvest was, and we’ll be out of view.”

Due to the owners’ willingness to rapidly implement new approaches—”Innovation happens overnight in our company,” said Laura Wakeman in the Wall Street Journal —Great Harvest franchises formed a close-knit community connected by an internal e-mail network, a system that served a vital purpose in the chain’s support system. In addition, through its Travel Match program, Great Harvest paid for half the travel costs when any franchise owner or employee visited another store in the system.

Tim and Marianne Heeren, owners of two stores in Wichita, Kansas, told a local business journal in 1996 that finding and retaining help was their biggest challenge. Their best answer was to create a relaxed and casual work environment. They played different types of music to accommodate their workers’ individual tastes and encouraged creative input from the employees, such as creating new bread recipes. In 1999, a Great Harvest store near Philadelphia was featured in television ads for Microsoft Corp. The owner was shown using the Internet to communicate with his peers and to monitor flour prices.

New Owners in 2001

In June 2000, Great Harvest was testing its first full-service restaurant in a former theater in downtown Butte, Montana. The company aimed to more than double the $450,000 average annual sales of a typical unit before taking the full-service concept national. The most successful Great Harvest shop at the time was taking in $1.3 million a year. Great Harvest received 5,000 inquiries and 150 formal applications in 2000; the company chose only half a dozen to join the elite community of owners. Great Harvest’s franchisees’ convention that year took place in teepees at Yellowstone Park.

In June 2001, St. Martin’s Press published a book of chief operating officer McMakin’s reflections, Bread and Butter, that became a best seller. Among its advice: make time for yourself first, then money. Tom McMakin, a former Peace Corps volunteer, had moved to Montana with his wife and joined Great Harvest as editor of its newsletter in 1993. He became chief operating officer in May 1997, a position he described to Franchise World as the company’s sheepdog: “A sheepdog knows the general direction we are supposed to be going and keeps the whole thing moving forward. It runs around the edges and kind of looks out for the whole.” He left the company soon after publishing his book.

Company Perspectives:

Our mission statement: Be loose and have fun; bake phenomenal bread; run fast to help customers; create strong, exciting bakeries; and give generously to others.

Key Dates

1976:: Pete and Laura Wakeman start the first Great Harvest bakery in Great Falls, Montana.
1982:: The Wakemans sell their store and focus on franchising.
1996:: The number of Great Harvest bread stores reaches 100 nationwide.
2001:: The Wakemans sell their company.

There were more changes at the top. In spite of founders’ emphasis on franchisees running their own stores, and the extent to which Great Harvest Bread Co. reflected their own lifestyles, in June 2001 Pete and Laura Wakeman sold the company to a North Carolina investment group for an undisclosed price. Nido Qubein and William Millis of High Point and Mike Ferretti of Charlotte lead the buyers’ group, which pledged to preserve Great Harvest’s loose management style. Qubein, owner of a consulting company, became the new chairman, while Ferretti became CEO. Andy Bills, another investor, told the Greensboro News Record that the group wanted to create a stronger growth strategy. “We think there’s a sleeping giant here with a lot of untapped potential,” said Qubein. The company announced its intention to have 500 stores by 2005.