Staying true to
what it does best, this Chicago-area bakery is poised to take on another half century of stability and measured growth.
Click here for additional photos of the Jarosch Bakery.
The more things change, the more they stay the same at Jarosch Bakery. It was 50 years ago that owner and president Ken Jarosch's grandfather, George, and father, Herb, opened the bakery. Today, it is located in the same suburban Chicago strip mall storefront that opened in 1959, using the same 24-tray deck oven that turned out Jarosch Bakery's first coffee cakes. And Ken Jarosch is again working his first job — though the pay is likely better than the 10 cents per hour he earned as a 10-year-old.
The bakery hasn't been Jarosch's only occupation, though. He and his wife, Kathy, were engineers at McDonnell Douglas (now Boeing) before returning to Ken's family business in 1989. For five years, Ken re-learned his first trade from his father. By the time Herb passed away in 1994, Ken and Kathy were entrenched in the industry, and they have been at the helm of the bakery ever since.
“Over the years, we've made a lot of incremental adjustments,” Ken Jarosch says. “When the bakery opened, most of Elk Grove Village was under construction, and the bakery grew with the community. Though we're always paying attention to changes around us, we haven't made any major overhauls or felt the need to reinvent ourselves.” With more than 50 years of growth operating with a philosophy built on small moves instead of sweeping changes, the proof is in the pudding.
Despite the recent commodities crisis and recession, Jarosch Bakery has been profitable as long as Ken can remember. “Sometimes we've been nearly flat, but we've still made a small profit, which is saying something, considering how badly the restaurant industry overall is hurting.”
Jarosch attributes the relative success to the bakery's status as an inexpensive luxury, a cheap perk. While Elk Grove Village consumers might be hesitant to splurge on expensive dinners, they don't seem to mind spending $10 at Jarosch Bakery on a coffee cake.
The bakery brought in $2.6 million in sales in 2009, up from the industry's universally dismal 2008. What surprised Jarosch was that 2009 December sales also were up when compared to the healthier 2007 economy. The stabilization of commodities prices in mid-2008 coincided with the deepest portion of the recession, and when the price of flour finally came down, Jarosch passed the savings on to his customers by offering numerous specials. They perceived the price decrease as a good faith price break during hard times, which helped garner goodwill and brought in more customers.
Jarosch Bakery produces a full line of products, from bread to sweetgoods to wedding cakes, but three product categories anchor the business — cookies, decorated cakes and coffee cakes/sweet rolls.
Jarosch Bakery's cookies, especially hand-dipped butter cookies, are well-known throughout the Chicago area. The bakery uses 70 to 100 lbs. of flour per week for cookies alone. After adding other ingredients, icing and sprinkles, that equates to 250 to 350 lbs. of cookies per week. In December, production ramps up to produce as much as a week's worth of cookies in one day. Variety, richness and the personal touch of hand dipping are the hallmarks of Jarosch Bakery's cookies.
Decorated cakes, also a mainstay at the bakery, have experienced a sales dip in recent years. “We are within a five-minute drive of at least one Sam's Club, one Walmart, one Costco, one Meijer, maybe more than one Jewel or Dominick's. That's our primary competition in decorated cakes, and their price points are something we can't match,” Jarosch says.
The decline in cake sales also is tied to demographic changes in Elk Grove Village, namely an aging population with fewer occasions to celebrate children's birthdays, but the trend seems to be area-wide. Jarosch serves as president of the Chicago Area Retail Bakers Association (CARBA) and is in close contact with many area full-line retail bakers. “Most owners I talk to see the same thing happening. Some customers think that if a cake is going to be for a bunch of children who wouldn't notice the difference in quality, or if there is going to be waste, then they go for the cheaper option,” he says.
The bakery currently produces about 300 decorated cakes per week. “Even on a Monday or Tuesday, a decorated cake is still going to average $50,” he says. “Even if we just do 20 of them, that might be a significant percent of revenue on any given weekday.” The bakery also produces “store cakes” (layer cakes and tortes) that retail for $15 to $20.
Jarosch also has noticed cake decorating television shows affecting customer requests. He appreciates the celebrity decorators' inventiveness and enjoys any national spotlight on cake decorating, but is concerned the shows don't relate any concept of cost.
“We aren't shy about charging what the labor and ingredients are worth, maybe $600 or more to serve about 25 people, and the customer immediately has sticker shock, even if it is pretty reasonable given the cost of producing the cake,” Jarosch says. “But those kinds of cakes aren't core to what we do. We survive by making a whole bunch of stuff, so we're always selling something. We have a big building with a lot of overhead; we can't do the feast or famine, piecemeal kind of business like that — selling two huge cakes one week and none the next.”
Coffee cakes and sweet rolls are the most consistent sellers at Jarosch Bakery, providing reliable daily sales year round. The bakery makes 56 coffee cake varieties, with 40 available in any given week. Jarosch sells upwards of 1,000 coffee cakes per week, with prices averaging $7 to $10 per cake. Top-selling varieties include the Swedish flat, chocolate chip and all-butter. An always popular coffee cake, which Jarosch calls the New Look, is a high-end custard and pecan variety that commands $12.25. Also, almond strip and fruit strip coffee cakes are big sellers, especially around holidays.
“Other retail bakeries also make great coffee cakes, but we all compete against the convenience of the Walmarts and Costcos of the world. They have yet to match our quality,” Jarosch says. “We may have lost some decorated cake business to them, but we don't see the loss in our quality, everyday retail products. They are far less of a threat in that capacity.”
Jarosch Bakery employs 52 people, with about half working full-time. Kathy Jarosch, serves as vice president and handles and front-of-store activity. “She also helps to act as a buffer between me and the employees,” Ken jokes. Four managers assist Kathy in supervising employees. Ken oversees baking operations. A decorating manager and a production manager supervise production and clean-up employees.
Production begins at 8 p.m. when the first baker arrives to proof and bake products, and begin the bread doughs. A second baker comes in at 12:30 a.m. to begin bread make-up and frycake production. Cake production begins at 4 a.m., with decorators arriving between 4 and 6 a.m. Danish and sweet rolls are made-up throughout the day, and are held in freezers to ensure most varieties are available as needed.
The longevity of the production employees has created a cohesive, stable environment. The decorating department experiences a little more attrition, and local culinary schools have been a good source of talent. Front-of-store sales staff also may be shuffled to help with decorating depending on the needs of the day. These employees often have a desire to become decorators themselves, and work their way into the position.
To keep employees engaged, Jarosch recently held a customer service contest. Employees were divided into teams competing for $300. Teams earned points by “telling on” other employees, but the twist was the tattles reported positive behavior and good customer service, not mistakes.
“The cool thing about it was that Kathy set it up so people could get more points by telling on someone — reporting an instance of good customer service — than for doing something good themselves,” Jarosch says. “This fostered teamwork.”
Another element of the contest was a weekly test encouraging employees to learn and understand the products they were selling. Passing the test earned employees 10 points. The tests proved particularly beneficial during the holidays when uncommon or seasonal products, such as stollen and holiday tortes, were offered. While it was a fun contest that promoted good customer service, it also ended up being a good training tool.
To help “train” customers about new products, Jarosch designates several items every month for customers to sample.
“Having been around for so long, we have customers that come in and order the same product they've been ordering for years,” Jarosch says. “Sampling encourages our customers to branch out and try something new, so maybe they'll add a new item to their usual order.”
At the bakery's inception, the northwest suburban region was the destination for young, blue collar Chicago families seeking the American dream of the house and yard.
“The community has aged,” Jarosch says. “The older people who first bought their homes here in the 1960s still live here, but their kids don't.”
The aging population has been a mixed blessing for the bakery. On one hand, an older client base is generally composed of people who grew up with a neighborhood retail bakery. These people tend to visit the bakery three to four times per week, and think of it, instead of supermarkets, as a primary source for bread. The downside is that the children whose birthdays and graduations buoyed Jarosch's cake sales have grown up and left. However, the town's changing demographics may soon turn around the bakery's decorated cake sales. Elk Grove Village is seeing a growing number of immigrant families with young children moving to the area. These families will need celebration cakes.
Despite the area's changing demographics, Jarosch doesn't produce a lot of ethnic items. “We pay attention to demographic changes and react to them, but we also have customers who come in and tell us that the coffee cake that they ordered is just as good as 10, 20, 30 years ago. There's something to be said for consistency — it's what we strive for,” he says.
Location: Elk Grove Village, Ill.
Market served: Chicago's northwest suburbs
Primay competitors: Walmart, Costco, Sam's Club, Jewel, Dominick's
Management: Ken Jarosch, president; Kathy Jarosch, vice president; Marianne Domino, decorating manager; Raul Farfan, production manager; Lucia Alesi, Debbie Milks, Jenny Clemens and Jenny Bartels, customer service managers
Number of employees: 52, half full-time
Number of bakeries: 1
Bakery size: 6,485 sq. ft.
2009 sales: $2.6 million
Production method: 90 percent scratch, 10 percent mix
Product line: 56 varieties of coffee cakes; nine strudels; nine muffins; 24 breads; 14 buns; 20 pies in two sizes; 22 pastries; nine cookies; 64 layer cakes tortes, buttercream and whipped cream cakes; decorated celebration cakes, wedding cakes
Major bakery equipment: Five 140-qt. mixers, three-door proofer, 24-pan deck oven, two-rack oven, three walk-in refrigerators, three two-door refrigerators, two walk-in freezers, 10-door freezer, 10-door half freezer
Plans: Cosmetic renovation in retail space
|Butter, 1 lb.||$14.65|
|Amaretto, 8 ins.||$23.95|
|Black forest, 8 ins.||$16.95|
|Tiramisu, 8 ins.||$19.90|
|Angel food torte,|
|German chocolate torte,|
|New York cheesecake||$13.25|