Franchise concept is key to Great Harvest Bread Company’s growth

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Bread! It’s long past being just another product on the retail shelves. It is indeed the “staff of life” throughout the world, praised in song and story, in religion, literature, philosophy and even economics.

As Julia Child put it: “How can a nation be called great if its bread tastes like Kleenex?”

There are few things that arouse the senses more than the smell of freshly baked bread, a philosophy that has guided the Great Harvest Bread Company since its inception in the 1970s. It’s also the strategy that will guide the Dillon, Mont.-based company’s future as it expands its bakery-cafés into more markets through a unique new “hub-and-spoke” franchise concept.

“Our basic principle is about doing bread the right way,” says Eric Keshin, president of the company, which now has some 200 franchisees in 44 states, most single-unit owners.

Maintaining the brand

Great Harvest’s founders graduated from Cornell in the 1970s and landed in Great Falls, Mont., “where some of the best wheat in the world comes from. Even today, we source from Montana,” Keshin says.

“We’re all about making everything from scratch. Each store has a mill that turns wheatberry into flour which is then hand-kneaded and baked. In fact, stores have to sell the bread within 24 to 36 hours or donate it to places like local food banks.”

The original owners of Great Harvest got into franchising in the late 1970s and early 1980s because they didn’t want to run company stores, Keshin says, and the concept quickly gained favor with potential owners throughout Montana and Utah.

Due to consumer demand and growth of the restaurant business, Great Harvest began evolving from a pure bakery into takeout sandwiches and soups and finally into eat-in bakery-cafés with seating for 40-45 people. These units run from 2,600 to 2,800 square feet and include production facilities that enable owners to mill wheat and bake bread daily.

“The original owners really didn’t have a rollout plan. It was kind of word of mouth. People fell in love with it and wanted to open one,” Keshin says; the bulk of owners are still single-store operators, but an increasing number are opening two or three units.

“We continue to have a great and original brand story. It’s an authentic brand and the principles we live by have never changed. In that way, we’re similar to Wendy’s or Apple,” he says.

One of the architects of major advertising campaigns for such companies as AT&T, Burger King, Applebee’s, Wendy’s, IHOP, Lowe’s, Kohl’s and Mastercard, Keshin is no stranger to developing branding principles and platforms, having spent 30 years with McCann Erickson.

Franchisees can purchase a large territory that includes one Great Harvest bakery operation and as many café-only units as they want in surrounding towns.

Sparking growth

The company’s growth is being sparked by the hub-and-spoke franchise model. Under the model, franchisees can purchase a large territory that includes one Great Harvest bakery operation and as many café-only units as they want in surrounding towns. The concept also enables owners to have multiple units under a single contract.

“We have bakery cafés that seat 40 people and legacy bakeries that serve sandwiches. The original bread bakery format came with a territory that was about 10 square miles. This makes sense when you’re a bakery. But as we evolved into bakery-cafés and began competing with Panera-type menus, we found we didn’t need 10 square miles,” Keshin says.

“The hub-and-spoke idea is that, in addition to existing formats, we let franchisees open a pure café that runs about 1,300 to 1,700 square feet and still seats 40 people but don’t actually bake the bread. That’s the spoke.”

The format also enables franchisees with a bakery to be located on a main street, locations that can’t support a Panera-style operation which may require a 4,000-square-foot footprint and urban sprawl. “They want to be where the big-box stores are,” Keshin says.

The Great Harvest model includes standalone store locations, though most are located in smaller shopping centers.

The hub-and-spoke idea also enables new multi-unit owners to open a bakery-café with an investment of about $400,000, far lower than other franchises, according to Keshin, allowing them to open additional “spoke” stores in neighboring towns which get fresh bread delivered to them by the “hub” bakery-café.

“It allows you to occupy towns more economically,” he says.

Territories are determined by population: A franchisee in a new territory can start with a 50,000-person territory and take that up to 100,000 people. Franchisees are not contractually obligated to reach specific revenue levels in their territories. “But we have goals we want people to hit,” Keshin says.

Local flavors

Company headquarters has a unique relationship with owners. “We call it a ‘Freedom Franchise.’ It’s different from a Wendy’s or McDonald’s where you basically have a rulebook and you have to do what they tell you,” Keshin says.

“We have a playbook, not a rulebook. The core principle is that you need to source wheat from local farms we select and mill it fresh. Nothing can be frozen. We provide recipes but it’s up to individual franchises to determine local tastes and what to bake every day. They are also free to determine local pricing, and while we can provide the supply chain for sourcing we encourage franchisees to source produce and protein locally.”

Owners can express their individuality through recipes. “They can source soups from our supply chain or make homemade items from their own recipes. This means that every Great Harvest you go into can be a bit different. One just opened in near Dallas that sells wine and beer. And a store might sell chowder in Boston but not in Iowa,” he says.

“We provide a base that people can tap into. In a way, we have 200 test kitchens out there with owners sharing recipes on a discussion board in a private online community. We have stores in Louisiana that make traditional king cakes around Mardi Gras. But other places around the country also have Mardi Gras celebrations. They sell a lot of king cakes but the recipe might actually come from an owner in Baton Rouge.”

While 80-85 percent of franchisees are single-store owners, the company’s focus will turn more to multi-unit owners. “There’s some significant territories like New York, California and Florida where our presence is limited, compared with a market like Salt Lake City where we have 16 stores,” Keshin says.

The company now has commitments for about 250 new stores over the next two years, including international expansion such as 10 units in the United Arab Emirates and stores near Guam “where we have commitments from current owners to open 20-25 stores over the next two years,” Keshin says. The company is also working with foodservice companies like Aramark to expand on university and corporate campuses.

Len Lewis is a veteran journalist and author covering the retail industry in the U.S., Canada, Europe and South America.

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