The Great Harvest family

Mike Ferretti claims he doesn't know his restaurants' average ticket. That might strike you as odd until you realize he's president and chief executive of Great Harvest Bread, which has no company-owned stores.

 

Headquartered in Dillon, Mont. (population 4,172), where precious little fits the standard fast-casual mold, Great Harvest opts to use franchising as an intellectual- property training business rather than an operations organization. That model has worked, too. It's an $80-million franchise chain that has 215 units, but limits growth to a maximum of 20 units a year.

 

"Honestly, it's a hard business. Made- from-scratch, fresh-milled flour in your bakery every day is a hard business," Ferretti said. "This is not a concept that you own as a passive investment, so there's a limit to the pool of people who want to do that."

 

To be a Great Harvest operator, you must buy your whole-grain wheat from headquarters and use it with milk. Beyond that, the "rules" are to be loose and have fun, bake phenomenal bread, run fast to help customers, and give generously to others. This so-called "freedom franchise" agreement means one in Michigan may look different from a Great Harvest in Hawaii. One entrepreneur may choose to sell sandwiches, the next may feature gourmet popcorn and jams from local producers, and another may offer organic coffees.

 

Even with this unique business model, Ferretti believes he's on the same track as the standard bearer in this niche: Panera Bread Company.

 

"We are operationally a little different than Panera, but they've done an incredibly admirable job of creating a beautiful store with the bakery process in front of your eyes. The baked goods are flat-out stunning," he said of his rival. "But that said, we take our baking process one step further. Everything we do is milled in the store — a proprietary product that's just eight hours old."

 

William Blair analyst Sharon Zackfia said Panera is a "clear leader in the fast-casual sandwich segment" with "good sales productivity." For the first quarter, the restaurant opened 22 bakery cafés with 897 total while same-store sales jumped 9.1 percent. 

 

And that's why Geoff Adams, who opened his Great Harvest Bread unit in Tempe, Ariz., in late December 2005, recoils from the comparison to Panera. "Absolutely not," he stressed. "Here in the Phoenix market, one person owns 26 Paneras. That kind of thing is not encouraged with Great Harvest. It's me and my family in this store every day."

 

Adams' story is classic Great Harvest:  His family enjoyed the food when they lived near a unit in Ann Arbor, Mich., but had to give it up when they moved to Phoenix, where Geoff was a junior high science teacher at an Indian reservation. Desiring a different life, his mother and stepfather looked up Great Harvest franchise opportunities on the Internet. It didn't take Geoff two seconds to say yes. Now the three of them, plus a cousin, take care of everything from bread-baking to marketing to accounting.

 

Ferretti banks on such passion. The numbers he does squeeze from this setup is certainly something to be proud of, too. Great Harvest has been in business for 30 years, and even during the darkest moments of the Atkins craze, its same-store sales average was down just 1 percent.

 

"We didn't suffer a tremendous kick in sales like a lot of the other carb-based companies that saw sales take a dramatic downturn," he said. "We just called that a flat year."

 

By 2004, the engine was again humming, and he expects 10-percent sales growth, which would take him to $85 million, in 2006.

 

 

It takes roughly $225,000 to open a Great Harvest Bread Company, and Ferretti likes to see one-third of that in liquid net worth, with total net worth at least double that opening amount. (He'll make exceptions such as when the applicant is an existing bakery employee.) But money doesn't talk in this situation as loudly as character. Each franchisee-wanna-be must go through a series of interviews with other unit owners and executives, a process that takes six months. The questions aren't cupcakes, and candidates are expected to answer in page-long essays, not one-word responses.

 

And if you don't demonstrate that you know how to be an active part of the community, goodbye and good luck. After all, Great Harvest's marketing is focused on passing out the samples at 10K runs, PTA meetings and  farmers markets.

 

"It gives me goosebumps just talking to you about it," Adams said. "Right now I have 10 people back there working their butts off, listening to their favorite music and making bunny-shaped loaves of bread."

 

The whole community is rallied around Adams' store because $3 from every loaf is being donated to the Tempe Children's Cancer Network.

 

"We put a lot of love and a lot of pride into what we do, and we know that everything we do here is not only going to be one of the best things our customers have tasted, but it is healthy for them, too," he said.