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Thursday, Mar 28, 2024

Recipe For Success

Ryan Paules didn’t blink when the former owner of Cookies by Design in Tarzana told him sales had been down-trending for the past five years. Paules had spent some time at the shop and thought he knew why sales were lagging. So in October, Paules acquired the franchise, a bakery that provides specialized cookie arrangements for a variety of occasions like birthdays and wedding showers. “She got sucked into being a full-time cookie decorator,” Paules said of the former owner. “When you’re decorating you don’t think about marketing.” Paules’ situation is typical of many who buy franchise operations, said Barry Kurtz, of counsel at law firm Greenberg & Bass, who specializes in franchise law. “It happens quite a bit,” Kurtz said. “The main reason someone would buy a business like this is they have the feeling they could do something better, even if the business was successful.” But as it turned out, identifying the problem was the easy part. Correcting some of the problems has turned out to be more difficult, especially for a small business that doesn’t have a lot of money to invest in marketing. Just 22, Paules bought the shop upon graduating from Cal State Fullerton’s entrepreneurship program. He had interviewed for several entry-level management programs, but for one reason or another didn’t find them to his liking. Paules’ dad had always advised him to be his own boss, so when his girlfriend told him that the owner of the shop where she worked was looking to sell, he began to explore the possibility. His college instructors helped him review the business’s books, and Paules spent several months working at the store, which had been in business under its former owner since 1993. The first thing he noticed was that the cost of making the cookie bouquets was about 5 percent of the final price. But what was really eating into expenses was the salary the former owner was paying herself. “I only needed half of what she paid herself,” said Paules, who, as a recent college grad, rents a modest apartment. But expenses were not the only problem. The store was simply not generating enough sales, so the next step was to address the revenue side of the equation. The store, located in a Tarzana strip mall, had not made use of any window displays to show the cookie bouquets, which include some 300 different baskets of colorfully- decorated baked goods with messages that range from ‘thank you’ to ‘get well soon,’ ‘happy birthday,’ and ‘have a nice day.’ Cookies by Design offers bouquets for every possible occasion as well as specialty cookies such as Disney licensed characters. The fanciful bouquets of decorated cookies arranged in baskets retail in the range of $49.50 for a 5-cookie bouquet to $97.50 for a 12-cookie bouquet. Paules bought some shelving and used it to line the windows with samples of the cookie bouquets. He also invested in a decal with the store’s name and logo for the front door entrance. The new shop sign was more easily visible to pedestrians than the awning overhead, which was previously the only signage identifying the store by name. “People would tell me, ‘I’ve been shopping in this center for 10 years. When did you get here?'” Paules said. There were also some operational fixes that Paules found he could easily make to increase sales, including installing a computer that now enables him to check for new orders that come in through the franchisor’s web site throughout the day. All told, he figures he invested another $3,000 in what he describes as “stuff the customer would never see.” The store used to require two days advance notice for a customized cookie bouquet so if a customer called asking for a same-day delivery, the store did not previously provide it. But now, by stocking some of the more popular types, for birthdays, new babies, ‘thank you’ and generic bouquets in the freezer, a system the franchise refers to as the “magic oven,” Cookies by Design does not have to turn down customers who didn’t plan in advance. “At 2:30 p.m. someone can call me and say ‘I need this to go to today,’ and we can send it,” said Paules. The biggest problem, however, has been building traffic and expanding the visibility of Cookies by Design to consumers and also to businesses. Corporate accounts, franchise-wide, represent about 10 percent of sales, but they only account for about 5 percent of Paules’ business currently. Paules has joined the local chamber and he has carved out alliances with some of his neighbors in the strip mall, giving them sample cookie bouquets to display in their stores. That will help increase the store’s visibility in the neighborhood, but Paules also needs to find a way to take advantage of the broader market open to him. Unlike, say, a restaurant franchise, which is typically limited to marketing to the immediate neighborhood, a franchise like Cookies by Design could sell to most of the Valley area. That, franchise experts say, should make it easier to boost the company’s sales. “He’s not limited to the people in the neighborhood who come in and buy his product,” said Kurtz. “There are all kinds of opportunities available to him from the party and catering point-of-view. It’s just the extent of his imagination.” One area Paules sees as a natural for expansion is the local real estate industry. Cookies by Design has a bouquet design with cookies shaped like homes and welcome mats that would work well for realtors who wanted to thank their clients following a transaction. “Realtors are the biggest bang for the buck,” Paules said, noting that they are easily identifiable, if not easily approachable, for direct marketing efforts. Other prospective business and corporate accounts, however, are not so easy to identify. Paules tried some direct mail pieces that didn’t even bring in enough business to pay for the cost of the mailing and now he is exploring other ways to attract those potential customers. The new window displays, and the alliances he has made so far, have attracted more walk-in business, but ultimately, corporate and catering accounts will be the best way to boost business. “Kids come in and they buy cookies but it’s a $2 sale,” said Paules. “And I want the $80 sale.” SPOTLIGHT: Cookies by Design Year Founded: 1993 Revenues in 2005: $228,000 Revenue in 2007 (projected): $250,000 Employees in 2005: 4 Employees in 2007: 3 Goal: “If I could break $300,000 in a 12-month period I would be very happy.” Longer term, Paules would like to open a second store in the northern part of the Valley.

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