A shift in thinking set this 30-year-old Tulsa bakery on a path of sustained growth.
Larry Merritt can't put a finger on the precise date it happened, but after at least a decade of owning and operating Merritt's Bakery, Tulsa, Okla., with his wife, Bobbie, he experienced a serious attitude shift.
“I remember sitting around in groups at Retail Bakers of America (RBA) shows and different trade gatherings, listening to fellow bakers bragging about how many hours they put in on the bench the day before so they could be at the show. And Bobbie and I had to put in just as much time,” Larry says. “I remember very consciously thinking, ‘Having to work a 20-hour day just to be here at a trade show sure doesn't seem like success to me.’”
But the definition of success is personal. From their bakery's inception in 1979 to the late 1980s Larry and Bobbie operated a profitable bakery business they had built from the ground up. The early days were rough, but the bakery put food on the table and afforded the Merritts a good lifestyle. But at some point, Larry and Bobbie realized that the long hours and never-ending work schedule weren't the kind of success they were looking for.
“We felt like failures because we had to work those 20 hours,” Bobbie adds.
But the shift in thinking was a gradual process until their son Christian Merritt, originally an engineer by trade, made a career change and joined the family business. During the '90s, they had opened and closed several locations, experimenting with expansion with varying degrees of success. The Merritts wanted to build a company, not just a bakery.
But for any baker with pride in his or her craft, relinquishing control can be difficult. They first experienced this in 1993, when re-opening a remodeled midtown location. The business immediately took off, with lines stretching down the sidewalk.
“That looks like success to a lot of people, but that was failure,” Bobbie says. They killed their business because the two of them could only bake so much, and they couldn't capitalize on their own popularity. With four decades of baking experience between them, it was reasonable to fear delegating baked products bearing their name to less-experienced hands.
But having learned their lesson, they resigned themselves to the decision to become business owners instead of bakers. They hatched a 15-year plan that included the incremental introduction of systems designed to maintain oversight while slowly ceding control of production to employees.
Christian brought with him a systems-mentality and a bit of tech-savvy that may have pushed Merritt's Bakery toward sustained growth.
“When you decide to raise and grow a business instead of just work a business, it's a very different mindset,” Christian says. “You have to decide whether you are doing a job because it's a passion and you're doing it just for yourself, or if you are trying to make money at it and build a business. And you can't change all of that overnight. We're just now getting the pieces in place to start to treat Merritt's Bakery like a business, with a lot of parts that we manage from a distance. We're present but detached; we have our hands in a lot of things, but it's in managing stores instead of operating them.”
One manifestation of the Merritts' new approach was implementing systems and procedures to ensure the business would continue to run smoothly without the physical presence of Larry or Bobbie. Christian developed straightforward flow charts describing precise procedures for any number of potential situations, from everyday procedures to unusual events, such as an injury or a power outage. These systems give employees the tools to meet challenges by themselves, without constant guidance. Official procedures were actually the first step in automating the bakery, giving the Merritts a degree of separation between their employees and themselves. But no system was more crucial to the expansion and growth than the computer system, which was added in 2003.
Housed in the production facility, a central server manages everything from inventory coming into the bakery to orders delivered from the facility to each of the four locations. The point-of-sale software feeds sales information into the central server, so the Merritts have a detailed understanding of what's moving where and when. Different reports access and mine the data, crunching inscrutable numbers to produce meaningful information.
“And we use those reports a lot, especially on holidays. We have to make snap decisions on whether to continue to make more of a product or cut it off, depending on our capacity. Without our system, we'd be making phone calls trying to tie together all the pieces of information to create one picture,” Larry says.
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Because they operate one system across all four stores and a production facility, they can pool information automatically. This gives them an advantage over having several stores with individual, isolated systems, particularly for inventory for the central production facility.
“The real value in this sense is that you can leave the tickets opened for longer because we more precisely know how many cakes we can comfortably produce. Because you don't want to overload your production capacity, we used to tend to get skittish and tend to cut off orders earlier than we had to,” Christian says. “This allows us to be more accurate and wait until the last minute before cutting off orders, meaning more sales.”
Another major savings was in the point of sale software. Because it's button driven and it's quantifiable in its pricing, when front-of-store staff ring up an item, it's always the price it is supposed to be. Human error can't be completely eradicated, but the software effectively eliminates under-pricing in mis-remembered prices, mistaken products and forgotten add-ons.
“It was surprising to us who had used to take orders by pencil and paper how much more accurate this made us. When Larry and I started, we'd lay tickets end to end and hold them down with a yardstick,” Bobbie says. “We used to have one yardstick days or two yardstick days; the level of precision we've gained with this software is amazing.”
The move to centrally control the bakeries via computer was an arduous one, but now that the groundwork has been laid, expansion is easy.
“The difficult thing is to move from one store to two,” Larry says. “Once you have the system in place to centrally operate two, though, it's just as easy to operate three or more. The existing system is just implemented in a new location.”
Christian epitomizes the Merritts' cultural shift from bakers to business operators. He spends more time hiring, training and arranging work schedules than he does on anything else in the bakery. “I'm not here to bake things. If I am, I can only make enough products as I can turn out in a given day,” Christian says. “That might be enough to pay for me, but not anyone else.”
But with their hands less frequently the dough and more frequently on the operational side of things, the Merritts have developed training programs to ensure product quality and customer service don't suffer.
Each new hire begins with a two-hour orientation class teaching the basics of the company. With 80 employees in five locations, it's difficult to maintain constant personal contact with everyone, so the orientation defines cultural aspects of the business, what Merritt's aspires to represent, while covering legalities and policy controls. The singular orientation impresses a consistent front, meant to avoid variations or strains depending on the mood or culture of the individual location. The need for a standardized training program becomes more pronounced with every additional retail store.
After orientation, training shifts to clinic-type sessions, either in the stores or in the group classroom at the production facility, each targeted at specific job skills. The Merritts are currently developing a contiguous set of clinics that, when combined, will be the equivalent of a 20-hour front-of-store training regiment, carrying the new hire from non-functional to functional in all areas except experience.
The importance of training has increased over the past five years, the result of a less socially capable generation. “I get a blank slate on a good day; other times, bad habits have to be erased and good habits rewritten,” Christian says. “The focus and granularity of the training has had to increase from what it used to be. People lack interpersonal skills, so we implemented a personality test as part of our screening for an interview. This additional step has significantly lowered our eventual turnover.”
Decorator training involves a graduated program allowing a person to move gradually up the ranks to more difficult designs. This system allows training to be staggered in such a way that one or two managers are handling three to five new hires. Previously, training required a 1:1 relationship.
Due to a comparatively miniscule attrition rate, production training has returned to a more traditional apprenticeship style. Merritt's provides health insurance after four months and company-paid retirement after three years, so production jobs are geared for long-term, even lifetime retention.
“We're getting there, from an operational standpoint. More people in the bakery are learning the systems, and if you're going to grow, that has to happen,” Larry says. “Otherwise, it all falls to one person, and eventually, the burden becomes to heavy.”
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Recognizing the need to seek new customers, the Merritts created a new position to shoulder the burden, hiring Jamie Calkins as marketing director.
“My main goal is to constantly keep the word out there, even when we're not busy,” Calkins says. “January through March is a slow time, so we take small events and make them big. For national pie day in January, for example, we did a week long event.”
Merritt's Bakery has an established customer base of older customers who have been loyal to the bakery for decades, but Calkins hopes to tap into the next generation of consumers in Tulsa. She uses direct e-mail marketing to send a newsletter two to three times per month. She also keeps the bakery active on Facebook and Twitter.
“With these strategies, we're trying to reach to people in their mid 20s, early 30s, people who have kids,” she says. “We're reaching out to moms on the go needing a birthday cake or treat for a school classroom. In order to keep business growing, we have to constantly reach out to the younger families.”
The bakery also has a presence at local events, such as the Tulsa Wedding Show. Calkins keeps track of baby-fests and venues for children in order to reach young moms. They've even altered their packaging to include the nutritional information that younger mothers seek when making purchasing decisions. Actively seeking new customers has been essential for growth at Merritt's Bakery.
Market served: Tulsa metropolitan area
Management: Larry Merritt, president; Bobbie Merritt, secretary; Christian Merritt, director of bakery operations
Annual sales: $4.7 million
Ingredient costs as a percentage of sales: 26%
Labor costs as a percentage of sales: 38% to 40%
Number of employees: 80 (95% full time, 5% part time)
Number of locations: 4 retail locations, plus a production facility
Store sizes: Retail, 2,400 sq. ft. to 7,400 sq. ft; production facility, 14,000 sq. ft., including walk-in freezer
Product line: Full-line retail bakery specializing in celebration, dessert and decorated cakes, including wedding cakes; breakfast pastries; savory pastries; Danish; donuts; cookies; cupcakes; muffins; bagels; pies and brownies
Product breakdown: Special-order cakes, 33%; cookies, 11%; holiday items, 9%; dessert cakes, 8%; donuts, 8%; pastries, 4%; cupcakes, 4%; wedding cakes 3%; lunch items, 3%; meat items, 3%; drinks, 3%
Sales breakdown: Retail bakery, 93%; wholesale, 4%; foodservice/lunch, 3%
Average check per customer: $13 to $16
Production method: scratch, 59%; mix, 40%; frozen, 1%
Major equipment: Two double-rack ovens, 30-pan revolving oven, two sheeter/moulders, four floor mixers, reversible sheeters, two depositers, cookie depositer, rotary cookie machine, two automated cookie machines, shrinkwrap tunnel, assorted bread slicers, donut fryer, pie press, chocolate machine and assorted refrigeraters/freezers including a 2,000-sq.-ft. walk-in
Bakery supply distributors: Dawn Food Products, Johnson Bros. Bakery Supply
| CELEBRATION CAKES | |
| Sliced custom cake-Italian cream | |
| Half sheet | $62.50 |
| 8 ins. × 12 ins. | $37.50 |
| 8-in. | $37.50 |
| 12-in. | $117.00 |
| Sliced flavored cake-lemon | |
| Half sheet | $55.50 |
| 8 ins. × 12 ins. | $32.50 |
| 8-in. | $32.50 |
| 12-in. | $107.00 |
| Sliced standard cake-chocolate | |
| Half sheet | $48.50 |
| 8 ins. ×12 ins. | $27.50 |
| 8-in. | $27.50 |
| 12-in. | $97.00 |
| DESSERT CAKES | |
| Cherry cheesecake | $17.50 |
| German chocolate cake | $19.75 |
| Turtle cake | $27.50 |
| PASTRIES | |
| Chocolate éclair, each | $2.50 |
| Dozen | $30.00 |
| Fresh fruit tart, each | $3.00 |
| Dozen | $36.00 |
| DONUTS | |
| Cake donuts, each | $0.75 |
| Dozen | $8.25 |
| Jelly-filled, each | $1.50 |
| Dozen | $16.50 |
| CUPCAKES | |
| Sprinkle-topped | |
| Each | $1.25 |
| Dozen | $13.75 |
| Decorated, each | $1.60 |
| Dozen | $17.60 |
| COOKIES | |
| Old fashioned, each | $0.65 |
| Dozen | $7.15 |
| Fancy decorated, each | $2.60 |
| Dozen | $32.20 |
| PIES (9 INS.) | |
| Chocolate cream | $11.00 |
| Apple | $13.00 |
| Key lime | $14.50 |