Champagne cakes, one variety of several in Smith's line of specialty cakes, also are a signature product prepared daily. Decorators fill vanilla chiffon cake layers with vanilla cream pudding and ice them with real whipped cream.

Interestingly, dessert cake sales have stabilized, while those of decorated cookies continue to climb. “Changes in family lifestyles are the reason,” Balmain says. “Families rarely eat dinner as a unit. As a result, we have seen a decline in purchases of dessert cakes. Decorated cookies are filling the void.”

Balmain maintains control of the cold spots in part by visiting the largest locations briefly each afternoon when business usually is slowest and the remaining outlets every two to three days. He looks for store cleanliness, employees' appearance, appearance of the showcases and performance with customers.

Resists micromanaging business

He acknowledges that he must restrain himself from micromanaging the business. “I've told our production manager and head sales people that I'm here to provide the tools for them to do their jobs the right way,” Balmain explains. “If at any time they don't have those tools, I want to know. And, if something is not done correctly, we discuss how to correct it. Often, they have the answers.”

He reviews with the head sales personnel their sales and stales figures and when problems arise, helps them identify solutions. “You need to give them enough flexibility to show that you have confidence in them to do the job,” Balmain observes. “As a result, they try harder to prove that they can do it. I want to monitor what's happening, not do their jobs.”

Head sales personnel are asked to maintain a 4 percent stales rate and to clear their cases by the end of the day. “We want our customers to know that if they don't come in early, they may not get what they want. And, they know the product they buy the next morning is fresh,” he says.

Smith's outlets are located one to three miles from one another and the production facility. “The distance accommodates our deliveries well, and the stores are separated just far enough so as not to cannibalize each other's sales,” Balmain says.

Two drivers deliver fresh product four times daily to the stores, beginning with donuts and Danish at 5:30 a.m. and finishing with the last cake and cookie orders at 11 a.m. This enables Smith's to deliver all items within about an hour after they are produced. “Our customers know that they can buy products from our outlets that are just as fresh as those they would buy at our main store,” he observes.

Drivers return from final deliveries at about 12 p.m. with each outlet's order for the next day. Copies are distributed to each department: donuts, cookies, cakes and sweetgoods. Bakers work holiday and shorter-run items, such as pies, bagels and bread, into the day's production.

Bakers prepare products for the four primary categories mostly from scratch. Cakes and donuts are mix made. They also make icings and fillings from scratch. Limited volume items, such as bagels and croissants, are prepared from frozen dough.

The bakery produces all products with one shift Monday through Saturday; department schedules are staggered to gain efficient use of the equipment.

Mixer operators arrive at 1:30 a.m. to mix donut doughs and pull retarded Danish items, made up the previous day, for proofing and baking. Remaining production employees arrive at 3 a.m., followed by the cake decorators at 4 a.m. Donuts and Danish are completed by 5 a.m. for the first deliveries to the stores.

Increased distribution expenses would suggest that having multiple deliveries is not cost effective. Smith's adds increased costs to retail prices to maintain 6 percent of gross profit level. (Separately, customers pay $12.50 minimum for special delivery orders.) “Most important, our customers expect fresh, high quality product. And, that's what they get,” Balmain says. “This helps keep their loyalty.”

Smith's accepts charge cards for customers' convenience and includes the cost in retail prices. “With cash sales we come out ahead,” he says. “After we introduced charge card acceptance, we learned that customers often spend more per purchase and shop more frequently.”

Distribution and charge card expenses are among the components that comprise Smith's retail pricing structure. “I don't believe in using a three-times-materials or four-times-labor formula to set retails because sometimes materials are key costs and other times labor is key,” Balmain explains.

All costs in pricing

Before Smith's introduces a product, Balmain conducts a time-and-motion study to determine materials costs; production and sales labor, including benefits and distribution costs. Combined, the costs become a percentage of the retail price.

While Smith's customers willingly pay for quality products and helpful customer service, they do not necessarily expect to find them in highly stylized, upscale store environments.

“We're an unpretentious, conservative community. Our customers cover all classes: construction workers, farm hands, business people, professionals and government employees,” Balmain notes. “Because of this, I don't make my stores too fancy.

“We don't want customers to enter our stores and think that they don't belong. We keep the stores clean, neat and inviting. Still, more-affluent customers understand that we can provide custom-made products that they cannot obtain elsewhere.”

Smith's Bakeries' approach to business is working. Consider sales per square feet: A 900-sq.-ft. store in a strip mall generates about $550,000 annually. The smallest outlet, a 200-sq.-ft. store with two display cases in an upscale mini food/convenience market, took in $7,000 last Christmas Eve, Balmain says.

When investigating new locations, Balmain bypasses new developments. “Generally, these residents have their disposable income tied up in furniture, children and mortgages,” he observes. He waits four to five years for a development to mature and seeks sites near populated centers, such as schools, hospitals and small manufacturing facilities.

Despite Bakersfield's current economic slowdown, Balmain remains optimistic. The metropolitan area has about 450,000 residents. Projections suggest the number will grow to 1 million within 15 years. Most new residents will commute to Los Angeles County, which will open opportunities for Smith's, he says.

In many respects opening new outlets during the next several years will be no different than what Smith's Bakeries has experienced for 22 years. “Each of our stores has differences in its customer base. That will be true of new locations,” Balmain concludes. “It's all about knowing your customers and providing what they expect.”

Smith's Bakeries
AT A GLANCE

Location: Bakersfield, Calif.

Web site: www.smithsbakeries.com

Founded: 1945

Management: Jim and Jacque Balmain, owners; Inez Muratalla, production forewoman

Number of bakeries: one production facility/retail store and six retail stores in strip malls, supermarkets, upscale food/convenience stores

Bakery size: production facility/retail store, 7,400 sq. ft.; outlets, 200 to 1,600 sq. ft.

Number of employees: production, 26; sales, 26

Product line: full line, averaging 72 items daily, with emphasis on cookies, donuts, decorated cakes and specialty cakes

Market served: metropolitan Bakersfield

Annual sales: $3.5 million

Major bakery equipment: vertical mixers, bun divider, divider/rounder, sheeter, proofer, two traveling tray ovens, bread slicer, rack washer, espresso machine

Bakery supply distributors: BakeMark, Robb Ross Foods

Smith's Bakeries
…A SAMPLING OF PRICES

Yeast-raised donut, glazed		$0.80
	Filled	$1.29
Plain donut, cake		$0.65
Bagel		$0.79
Blueberry muffin		$l.08
Apple Danish		$0.94
Fudge-iced brownie		$1.19
Decorated shortbread cookie		$1.19
	12 ins.	$18.95
Banana nut bread		$4.98
Apple pie, 8 ins.		$9.29
Fresh strawberry pie, 8 ins.		$13.95
Plain angel food cake, 9 ins.		$7.49
German chocolate cake, 8 ins.		$18.25
Carrot cake, cream cheese icing, 8 ins.		$19.25
Champagne cake, 8 ins.		$25.90
	¼ sheet	$37.50
Decorated cake, 8 ins.		$22.80
	¼ sheet, single layer	$20.40
	½ sheet, single layer	$52.50
Butter dinner rolls, 12 count		$3.99
White bread,		$2.19