Case study: Retail vs. wholesale

Right recipe

For Goodness Cakes founder experiments to find best business model

by Liz Wolf   When Jodi Braun launched For Goodness Cakes in 2002, she was baking dozens of gourmet cakes out of her Eagan kitchen in what she calls a “rickety old oven.”

“There were days when I had my counters covered with pans. It was crazy,” says Braun, adding that she baked about 200 cakes in her first few months in business.

Braun, now 50, also did all of the delivering, often driving to 12 houses a day.

She has come a long way from those start-up days. Today, she’s working with a big-name distributor, sells her cakes at Byerly’s, Lunds and Kowalski’s Market, recently landed a contract with Simon Delivers and is in price negotiations with several national retail chains.

She grossed $175,000 in 2005 and expects sales to approach seven figures in 2006. And it all started with a family recipe and a dare.

Braun, a mother of three, was ready for a career change. Throughout the years, she had worked in sales and marketing, managed a women’s clothing store, worked as a real estate consultant and ran a catering business that was “too much work for the money.”

Meanwhile, she was well-known among family and friends for her milk chocolate chunk cream cheesecake, which she had been perfecting for more than 30 years. The five-pound, 10-inch-diameter cake is a cross between a cheesecake and coffee cake.

“It was originally my mom’s recipe, but hers called for sour cream and I changed it to cream cheese,” Braun says. “One day a friend said, ‘Jodi, why don’t you sell your cakes?’ I thought ‘no way.’ ” But she prodded Braun a bit, “so it was almost on a dare, truly.”

Intrigued by the possibility, Braun came up with a dozen flavors, but all had two common ingredients: cream cheese and one pound of chocolate.

Braun began taking orders from friends and acquaintances and relocated operations from her kitchen to a commercial kitchen in Apple Valley. Eagan’s Lifetime Fitness cafe sold slices of Braun’s cakes, which gave her more visibility. She started to build a clientele and needed a shop.

She devised a business plan, applied for a loan and found space in Eagan Town Center.

“I figured I needed $150,000,” she says. “I went to my banker, but I hadn’t been in business for two years with a ‘real’ business, so they wouldn’t even look at me.”

She contemplated another option. “This was the big gulp. I went to my mother and she co-signed a loan. She believed in me and the cakes.”

However, Braun underestimated. Rent, equipment, utilities, supplies, insurance, taxes, payroll all took their toll. “$150,000 wasn’t enough, but I didn’t know that until I got into the shop,” Braun says.

“One lesson I learned is you never have enough money. Whatever you think you need, double it.” It also never occurred to her to lease equipment instead of buying everything.

The shop opened in November 2003, and her first Christmas was successful. “We did 175 cakes, but getting into January and February I started to feel it. We weren’t making as much as we needed. I was out of money. We were using all of Jim’s money, and he’s supporting a family and a business.” (Jim is her husband and a purser with Northwest Airlines).

“Everything the business was bringing in was going back into the business, and we were still short a couple of thousand every month… You have days when you have $5 and do you buy gas or food?”

New direction
Considering wholesaling, Braun met with a retail executive for feedback. “He said, ‘You’d have to go mass production,’ and I was thinking I could wholesale out of my shop,” Braun says. “I said I would never go assembly line. I was afraid of losing that homemade taste. But when asked if I could do 5,000 cakes, I started thinking maybe this eventually will go assembly line.”

Braun’s big break came when she landed a contract with Northwest Airlines to serve her cakes in first-class on domestic flights. (Jim helped instigate the deal by taking samples to Northwest’s food service). So Braun needed lots of cakes — and fast.

She found a baking production plant that could make a duplicate of her cake in a smaller version, which could be sliced. However, she later had reservations.

“It’s three weeks before we were going to deliver for Northwest, and I just knew it wasn’t going to work” with this plant. “They started raising prices and they just weren’t helpful. But we had to get these cakes moving.”

Braun called a “million other plants” and found one to handle the job. “The order was 4,000 cakes every six weeks on a rotation, and I made about a $1 a cake so it was decent money,” she says. Braun stopped supplying cakes after Northwest’s bankruptcy filing, but the exposure led to another deal.

A Kowalski’s executive was on a Northwest flight and was impressed with the cakes. Soon after, Braun inked a deal with the grocer to be in its nine locations.

“The cakes have been very successful,” says Steve Beaird, Kowalski’s bakery director. “We like unique and different, and her cakes are unique.”

After landing Kowalski’s, Braun decided to sell her shop. “I’m into wholesaling and my mind is definitely out of retailing,” she says. “Retailing was time-consuming. Expenses were overwhelming, and I wasn’t making the money I knew wholesale could make.”

However, Braun says she should have marketed the shop before closing. “Never sell a shop when it’s not operating,” she advises. “Big mistake. It looks better if you’re open.

“I was hoping I’d get $100,000 for the shop. I sold it for $20,000.”

Despite the challenges, the shop was essential. “It legitimated our business and gave us visibility. I couldn’t have gone to Northwest and said, ‘I’m baking out of my kitchen. Do you want to buy my cakes?’ ” Braun says.

“We also needed to find out what the public liked. When I went wholesale, I knew my top three flavors.”

“It looks like wholesaling was the way to go,” observes Linda Zelm, vice president, retail services at Griffin Cos. in Minneapolis. Zelm helps retailers find space and has consulted startups. “Retail takes every hour of the day and night and you have to be there, because you often can’t afford to hire help.”

Doors are opening
An executive from Lunds Food Holdings Inc. stopped by Braun’s booth at a food and wine show, which led to a deal where Braun now sells her cakes at all 22 Lunds and Byerly’s stores. Lunds also offered to bake Braun’s cakes at its Eden Prairie plant. She jumped at the opportunity.

“Having Lunds’ name is huge,” Braun says. “It’s immediate respect.”

Braun is now working with, among others, BakeMark, a large, national distributor, and is talking with other distributors. She just signed with Simon Delivers, the Twin Cities grocery delivery service.

“Things are taking off,” Braun says, adding that there’s one particular moment that stands out.

“When I started, I wanted to be like My Grandma’s Coffee Cake” out of New England. “I thought, if I could only be like her. At our first meeting with Kowalski’s, they pointed to a shelf and said, ‘This is where you’ll be in the bakery,’ and they took Grandma’s off the shelf. That was the day I knew I made it.”

[contact] Steve Beaird, Kowalski’s Market: 651.777.2494; www.kowalskis.com. Jodi Braun, For Goodness Cakes: 651.686.8759; go***********@*ol.com; www.forgoodnesscakes.com. Linda Zelm, Griffin Cos.: 612.904.7831; lz***@********os.com; www.griffincos.com.