| Zaro's Bread Basket at a glance |
Company name: Zaro's Bread Basket
Location: Bronx, N.Y.
Primary business: 75% retail and 25% wholesale
Market served: New York metropolitan area
Number of retail locations: 11 retail units, one major commissary, one off-premise bake-off facility for four stores in Grand Central Station
Annual systemwide sales: Retail, $15 to $18 million; wholesale, $3 million
Production methods: scratch
Management: Stuart Zaro, co-president; Joseph Zaro, co-president; Raphael Ben-Shalom, plant manager; Larry Marco, vice president finance; Bill Frymoyer, vice president human resources; John Apgar, vice president store operations; Milton Karl, production manager; Grazio Darmanin, production manager
Major equipment: silo, vertical mixers, spiral mixers, bowl hoist, bread divider, manual and automatic bun divider/rounders, cookie and batter depositors, reversible sheeter, sheeter moulder, baguette moulder, pie press, Danish line, croissant machine, bagel machine, proofer, rotary rack ovens, traveling tray oven, refrigerator/retarder, freezer, computerized decorating machine, wrapping machines Product breakdown: 65% sweet goods (cakes, cookies, muffins, croissants, etc.); 35% bread, rolls and bagels
Web site: www.zaro.com (e-commerce portion of the site will launch April 1.)
Zaro's has 11 locations, including four in New York's Grand Central Station.
Bread, baked from scratch using a sourdough starter, account for 20% of Zaro's retail sales.
Wrapped retail products, such as babka, rugalach and strudel, are displayed on racks near store entrances.
While some elements of Danish production have been automated, employees fold apple turnovers by hand.
Zaro's Bread Basket:
Rye bread, 16 ozs. .....$3.25
Even for Zaro's on-the-go customers, cakes generate nearly half of the company's retail sales.
Every day, Zaro's Bread Basket stops New York and New Jersey commuters in their tracks. But, eye-catching arrays of scratch-baked products are only part of the reason the third generationowned and -operated 11-store chain is so successful at corralling commuters every day, and often more than once a day.
"One of the most important things to consider when dealing with a commuter customer base is that these people aren't going to wait for service," company co-president Stuart Zaro observes. "They expect to be in and out of the stores in about 30 seconds."
"If customers have time to look at their watches, you're not moving them through fast enough," Zaro's production manager Milton Karl agrees.
And that takes precision timing when, "you're serving thousands of customers before 9 a.m., as we can do at Grand Central," Zaro says.
Zaro's has perfected its service systems during more than 25 years of operating stores in the New York metropolitan area's major train, bus and subway hubs. But, the baking skills and company origins go back to 1927 when Eastern European immigrant Joseph Zaro opened his first bakery in the New York City borough of the Bronx.
By 1965, Philip and William Zaro, sons of Joseph Zaro, had expanded the bakery to 20 stores throughout the Bronx, including one 4,000-sq.-ft. combination production and retail facility that serviced all locations. In 1977, they changed the entire course of the business with the opening of their first retail bakery inside mid-town Manhattan's Grand Central Terminal (better known as Grand Central Station).
"This was the first time quality food for immediate or take-home consumption was offered in any major train or bus terminal in the area," according to Zaro who runs the business with his brother, Joseph. Their father, Philip, continues to serve as chairman of the board. "Before that, commuters could buy sodas and maybe hot dogs or pretzels on their way to and from work."
The 3,200-sq.-ft. Grand Central store was an instant success with its on-site baking. Although that original store is long gone, Zaro's presence and sales in the terminal have remained consistently strong.
Today, Zaro's signs hang over four locations (three 800-sq.-ft. locations and one 400-sq.-ft. unit) in the main terminal and lower level food concourse where commuters dine and pick up take-home fare at the upscale farmers market, Grand Central-Market. Commuters also can find Zaro's in two locations in New York's Pennsylvania Station, one in the Port Authority Bus Terminal, one in Penn Station in Newark, N.J., and one in a busy subway stop in the Bronx. An eleventh bakery is located in a small shopping center in Yonkers, New York's fourth largest city.
On the right tracks
From these high profile locations, Zaro's not only serves commuters coming into Manhattan, but also goes home with them to Long Island, Westchester County, Brooklyn, Bronx, Queens, Staten Island, Connecticut and New Jersey. "More than 1.5 million pedestrians pass right by the front of our stores every day," Zaro says.
All of that brand identity-building has also yielded another bonus for Zaro's. Two years ago, the company added a wholesale segment to its business.
"In its first year, wholesale brought in $2 million," Zaro says. "We saw a 50 percent rise in 2003 and expect another increase of at least 20 percent in 2004. Within three or four years our wholesale will be just as big as our retail."
However, retail continues to drive the business with revenues about five or six times the current wholesale sales. The company also plans to add two New York locations in 2004.
Basic production for all the stores and wholesale is done at Zaro's 40,000-sq.-ft. facility in the Bronx. Of the company's 450 employees, 150 full-timers work at the facility, which operates seven days a week. "In 75 years, we've only been closed twice. And both times were because of blackouts," says Raphael Ben-Shalom, plant manager who has been with the company for 35 years.
Freshly baked products
Many products, including bagels, croissants, chocolate chip cookies, rugalach and Danish, are baked off at all of the stores except the four at Grand Central Station, which are too small to support ovens.
Products for the Grand Central stores are baked off in a separate 3,000-sq.-ft. commissary near the terminal. The commissary also makes sandwiches and salads for the stores, corporate catering and delivery.
Everything made in the Bronx production facility is meant to be baked within 48 hours of delivery, so the stores keep the doughs in retarders instead of in freezers.
Guaranteed fresh products
"Busy stores get bagels delivered every day, croissants every other day," Zaro says. "At most, the stores get enough raw product to keep them for two days."
Aside from shrink control, on-site baking works for Zaro's because its customers prefer products to be warm from the oven.
"There's no better advertisement than seeing melted chocolate over somebody's face," he says. "Unless it's the smell of a just-baked cookie, whether it's in our stores or on the train or bus."
Each year, the facility makes almost two million bagels in 10 varieties and close to 150,000 loaves of challah for sale at its retail bakeries. On a typical Friday, the company sells an average of 2,500 to 3,000 challahs (1,200 at Grand Central alone). On the two days before the Jewish holiday of Rosh Hashannah, Zaro's sells at least 5,000 of the braided loaves.
"People often buy two challahs and eat the extra one still warm from our oven on the way home," Zaro adds.
Profits in black and white
Aside from a wide range of Jewish specialties, Zaro's also is known for its black and white cookies, a New York favorite. Between retail and wholesale, the bakery sells about 275,000 of the cookies each year.
At 6 ozs. apiece, Zaro describes the black and whites as oversize, like many of the bakery's products.
"Although customers often say, 'I couldn't possibly eat it all,' we have found that the bigger a product is, the more we sell," he observes.
Also big in size and sales are Zaro's butter-based biscotti. Head Pastry Chef Grazio (Gus) Darmanin explains that the biscotti is so popular that his production crew has to make a total of 600 lbs. of dough every week. Double that if you include the bite-size versions of the Italian sweet.
With Zaro's primarily commuter customer base, it is not surprising that the company's top-selling retail items, in addition to the bagels and black and whites, are cookies (625,000 per year) and muffins (810,000). But, Zaro emphasizes, the bakeries also sell a lot of cakes. Birthday cakes account for 20 percent and other cakes make up 25 percent of retail sales. Loaves of sourdough starterbased breads account for another 20 percent.
To increase Danish production, Zaro's automated its line last January, resulting in a 20 to 25 percent savings in labor costs even though cheese Danish and apple turnovers are still folded by hand. Two years ago, the production facility added a packaging line, including horizontal flow and shrink wrap machines, which has since done double duty wrapping wholesale orders and grab-and-go products for the stores.
Zaro admits that, until recently, he was staunchly opposed to prewrapping products for the bakery's retail locations.
"I didn't think customers would perceive the products as really fresh," he explains. "But I didn't mind at all being proven wrong."
Now, wrapped loaves of babka, packages of chocolate and cinnamon rugalach and boxes of strudel tempt customers from racks and tables near the stores' entrances.
"Since we started packaging strudel in 12-oz. boxes, we've been selling three times as much of it as we did before," Zaro observes.
With an already crowded product repertoire totaling more than 300 items, Zaro is hesitant to add new ones unless it is guaranteed to become a popular product. Recent additions that fit the bill include turtle cheesecake, 7-in. tiramisu layer cake, 8-in. pecan and apple rings and non-dairy vegan cake loaves.
In the quest to discover the next big thing, Darmanin creates a new layer cake variety and some individual pastry items every Wednesday. Known as "Gus' Treasures," the trial items are sent out to the stores to see if they sell.
While Zaro notes that the quality of the products his bakeries sell could fetch higher prices, the bakery has decided to keep prices lower and sell more products.
"Our objective is to make our business recession-proof," he explains. "People are going to buy coffee and muffins in the morning, sandwiches at lunch and birthday cakes on special occasions no matter what.
"When the economy is not good, we still offer them a great product at a moderate price," Zaro points out. "Even when the economy is good, if you can get exactly the birthday cake for $24 from us, why would you spend $30 or even $70 somewhere
Zaro's Bread Basket sees growth in wholesale
Until about two years ago, wholesaling was a side line, worth about half a million dollars a year for Zaro's Bread Basket, a major full-line bakery chain with 11 retail locations throughout the New York metro area. But in the late 1990s, soaring retail property prices in Manhattan made co-presidents Stuart and Joseph Zaro take another look at parlaying their company's 75 years of brand equity into wholesale profitability.
With retail stores in such high visibility commuter centers as New York's Grand Central Terminal, Pennsylvania Station and Port Authority Bus Terminal, Zaro's had developed a strong brand identity, Stuart Zaro explains. But learning about wholesale has been a whole new game for the brothers.
"At first, we had a bunch of accounts that wanted delivery five times a week, but were giving us maybe $30 to $40 per day in business," he recalls. "Our delivery costs were way too high. We were making too many stops for too little money."
By focusing on acquiring higher volume accounts, Zaro's has turned that around.
"And we were surprised to find that most of those original customers didn't leave us. They just increased their orders to $100 or more and reduced their deliveries to once a week," he notes.
Packaging immediately became an issue, solved by the purchase of horizontal flow and shrink wrap machines. The company also had to add 40 employees to its 40,000-sq.-ft. Bronx-based production facility to handle the increased demand.
Currently, Zaro's offers about half of its 300-item product line for wholesale, including its signature "big homestyle all-butter cookie" in six different flavors.
In addition to providing traditional favorites, Zaro's also has become a wholesale product innovator. A line of low-sodium, dairy-and cholesterol-free loaf cakes have become good sellers.
The company also has done well with a new selection of individual portion crumb cake slices. Baked in half sheet pans and cut into 3-in. squares, the snack cakes have become so popular that the bakery sells 900,000 squares a year.
"When we first moved into this production facility in 1982, 40,000 sq. ft. was too big for us," Zaro explains. "Now we're getting a little tight on freezer and office space. But we have room to build on another 17,500 sq. ft., so adding more equipment won't be a problem."
With plans to grow the wholesale business from its current $3 million to $15 to $20 million, Zaro has no doubt that the company will make good use of that space.
"It's down the road for us," he says. "But I can see it happening within five years."