Bread Store Tells Franchisees
To Do Their Own Thing, Really

By THOMAS PETZINGER JR.
The Wall Street Journal
November 21, 1997

"B E LOOSE and have fun." That's how the mission statement at Great Harvest Bread Co. of Dillon, Mont., begins -- no surprise, perhaps, for a company founded by a couple who got through college selling whole-wheat bread from a roadside stand in the early 1970s.

The real surprise is that Great Harvest's "be loose" philosophy permeates a chain of 151 stores with $60 million in annual revenue. Great Harvest is a franchise operation, but it hardly operates like a franchise.

In this company, franchisees run their stores as they see fit -- tinkering with recipes, setting their own prices, varying as much as they choose from the basic model. No two locations are alike. The home office conducts no store inspections.

As the cover page of the Great Harvest franchising contract states in big, bold letters:

ANYTHING

not expressly prohibited by

the language of this agreement

IS ALLOWED

Why does Great Harvest flout the cookie-cutter conventions of franchising? Partly because of the personalities of its founders. But the company also finds that freedom in franchising inspires ways of doing business that ultimately benefit every member of the system.

"We are a richly cross-linked community," says Pete Wakeman. Adds his wife and co-founder Laura Wakeman, "Innovation happens overnight in our company."

Thus, a franchise near Detroit comes up with a new way to package gift boxes and the concept spreads by phone from store to store. Someone else invents a whole-wheat cinnamon swirl, and soon many stores have the recipe by e-mail. When calls and e-mail won't do, Great Harvest pays 50% of travel costs when any franchise owner or employee visits any store in the countrywide system.

AS CORNELL undergraduates 25 years ago, Pete and Laura Wakeman were ahead of their time in the business of baking honey-wheat bread. We're talking 100% whole wheat, not the diluted, stepped-on kind you buy in the grocery store. Their love affair with wheat drove them out here to the middle of grain country, where they opened a retail bakery. Soon they were milling their own flour, right in the store. In 1978, someone asked for a franchise, and they've been selling them ever since (currently for $24,000 each). But despite thousands of annual inquiries, they sell only a handful each year. Why such slow growth?

Like all good Woodstock-era alumni, the Wakemans hate the idea of telling anyone else to do much of anything. Yet the Wakemans also harbor stubborn views about bread. It has to be whole wheat -- made from flour ground fresh on the spot. It ought to be sold hot. And customers should be offered a steaming slice -- free -- the second they cross the threshold of any store.

Slow growth permits the company to maintain these rigorous standards without resorting to conventional controls, accomplishing with constant teaching and moral suasion what other franchisers do with thick operating manuals and strict enforcement. "We have a complete checklist," says Ms. Wakeman, "but we don't put you out of business if you don't do it our way."

And although it raises the risk a store may fail, the do-your-own-thing ethos generates a priceless benefit: constant systemwide innovation.

Take Ed and Lori Kerpius. Four years ago they quit their jobs -- his as a currency trader, hers in retailing -- and opened a bakery in Wayne, Pa. After their first year they began experimenting. They added cookies, invented new breads and started a coloring contest that now draws 5,000 entries a month, overwhelming the shop walls with kid art.

THAT'S ONLY the beginning. This year they picked up some new counter-service concepts in a visit to the Northville, Mich., store; studied signage on a trip to the Chapel Hill franchise; and gave tips on childrearing issues after flying to the Great Harvest owners in Boston.

"Yeah, we're part of a franchise," says Mr. Kerpius. "But we're also growing a business on our own."

One of my favorite thinkers, Mark White, a business consultant in Mexico City, calls outfits like Great Harvest "common law" organizations because they permit everything they don't prohibit -- as opposed to "Roman law" organizations, which prohibit everything they don't permit. "When you institute the common law," he says, "you get faster economic adaptation, whether you do it in a nation like the U.S., a city-state like Hong Kong or companies like 3M and Hewlett-Packard."

In this on-line era, academics struggle to discover the optimum rate of network connectedness to foster innovation. Great Harvest has watched its optimum naturally evolve. The stores that collaborate best seem to limit their regular contacts to just three to five other stores, while maintaining a looser group of roughly 10. "News travels very fast, yet the system doesn't bind up," Mr. Wakeman says. "You don't need to know the person who has your answer. You'll get all you need because they know someone who knows someone who knows you."

The extensive sharing and critiquing of concepts, including some of the company's secret baking methods, exposes Great Harvest to the danger of leaks to competitors. But that's OK, Mr. Wakeman says. "They'll be left holding a blueprint of what Great Harvest was, and we'll be out of view."