Smith’s Bakeries, owned by Jim and Jacque Balmain

Smith's Bakeries is bucking a trend in retail baking.

Since the mid-1980s, the number of multiple-unit retail operators with six or more retail outlets across the country has shrunk from more than 100 to about a dozen. Meanwhile, this Bakersfield, Calif.-based MUR operation has increased its outlet count from three to seven. Annual sales of $3.5 million reflect that growth.

Jacque Balmain and husband Jim; whose father, Roy, and Howard Smith, founded the business in 1945; attribute their success to strategic selection of outlet locations, negotiating favorable terms with landlords, maintaining control of outlet operations, gearing product lines to meet customers' needs, providing helpful customer service and, most importantly, offering fresh, high-quality bakery foods.

As a youth, Balmain worked in the bakery. By 1960, he had married Jacque and was continuing his education when family medical expenses forced him to seek employment.

He chose to return to the bakery, which he ultimately purchased in 1985 when his father and Smith retired. They were operating three stores, including the current production bakery.

Balmain increased the number of cold spots to six. Two are in strip malls, two in conventional supermarkets and two in upscale mini food/convenience markets.

He eschews owning fixtures and real estate, preferring to rent space while owning the business. Initially, supermarket landlords provided all fixtures and staffed the outlets, while Smith's supplied product at a 22 percent discount to retail and a packaging allowance.

“That worked until the landlords began delaying payment of the bills, not controlling sales and stales effectively, and allowing customer service to slip,” Balmain says. “We soon agreed to have the landlords install the fixtures, pay utilities except telephone, and Smith's would handle staffing and sell its product in return for 4 percent of sales.” The bakery leases the two strip mall sites at rates equivalent to about 4 percent of outlet sales. “By all measures, the current set-up works much better.”

The concept requires minimizing overhead with minimal space and allows control of product and labor, he says.

The supermarket outlets have their own cash registers and the bakeries are positioned at the store entrances. Sales personnel sell morning items from two to four service cases.

In the afternoon, customers select items from packaged product displayed on tables near the showcases and pay at the supermarkets' cash registers. “This requires trust. I've known the stores' owners for many years and trust them implicitly to credit the bakery sales correctly,” he says.

Head salesperson runs location

Each location has a head sales person and one to five associates, depending on sales volume. Balmain handles hiring. The head sales personnel are responsible for employee training, placing daily product orders, monitoring sales and stales and requesting each week's labor hours.

When placing orders, head sales personnel use guidelines for required products; they also focus on products that sell best in their locations. “Our people know their customers and what they like,” he says.

The Brookside Market at the Oaks location sold more than $7,000 of product on Christmas Eve day.

The bakery produces an average of 72 different varieties of bakery foods, such as seven flavors of Danish and 35 of donuts. “These are the products that our customers tell us they want,” Balmain says. “We can make them in volume with high quality. We don't have to worry about making a lot of short-run items.”

Decorated shortbread cookies, the top-selling category, total nearly one-quarter of dollar sales. However, during holidays, cookie dollar volume rises to 50 to 75 percent. To help meet demand, bakers bake cookies for the freezer, which holds 2,800 dozen at -10°F, and pull them as needed for decorating.

Unit sales of smiley face cookies, the largest seller, average 150 dozen a day, he continues. “These cookies have become a signature product for us.”

An annual cookie promotion, “Cookie Carnival,” held the first week of the school year, helps boost cookie sales during an otherwise slow period and keeps them top of mind among customers, Balmain notes. The promotion offers a dozen cookies free of charge with the purchase of two dozen. “This week always is big for us,” he says.