Mrs. Fields' Original Cookies, Inc.
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http://www.mrsfields.com Statistics: Private Company Founded: 1977 Employees: 4,007 Sales: $133.6 million (1998) SICs: 2052 Cookies & Crackers; 2051 Bread, Cake & Related Products; 5461 Retail Bakeries Company History:
Mrs. Fields' Original Cookies, Inc. bakes and sells specialty cookies, brownies, pretzels, and other baked goods. From one store started by Debbi and Randy Fields in 1977, the firm has expanded to over 1,500 stores named Mrs. Fields' Original Cookies, the Great American Cookie Company, the Original Cookie Company, Pretzel Time, Hot Sam, and Pretzelmaker. This is a true success story of an American homemaker and her husband who overcame numerous obstacles to create an international business. However, like many companies that began as family businesses, it reorganized under outside leadership and ownership. The firm's chocolate chip cookies were so popular that they became the subject of a modern urban legend in the late 1980s and early 1990s.
Everybody Said She Would Fail
Debbi Fields grew up in a Catholic working class family in Oakland, California. Her father was a welder and her mother raised Debbi and her sisters to become good wives and mothers. Growing up, Debbi held a burning desire to be special. Although she was a mediocre student, she learned to work hard and sought a way to fulfill her dreams. Debbi graduated from high school, then worked at various jobs before marrying Randy Fields, a Stanford University-trained economist, in 1976.
For about a year as a new wife, Mrs. Fields tried to fit into her husband's world as a dutiful spouse by hosting visitors and making polite conversation. However, a painful incident in which she tried to pretend she was a sophisticated person made her decide to do something else with her life. In the book One Smart Cookie, she said, "at last I understood that I had to do something that was mine.... I gave up, in that moment, the desire to succeed in other people's eyes and realized that first I had to succeed for myself." She elaborated, "I couldn't be Randy's shadow any more, his tagalong.... Somehow I would have to change, to become an independent, self-respecting individual able to stand on my two feet."
Debbi Fields decided to start a business based on a skill she had acquired as a girl. From age 13 she had baked delicious chocolate chip cookies for her family and friends. She gradually improved the basic recipe pioneered in the 1930s by Toll House.
Her husband's business acquaintances loved her cookies, so she asked them what they thought about starting a cookie business. "Bad idea," they said with their mouths stuffed full of cookies. "Never work," they said, "Forget it." Debbi's mother, her in-laws, and her friends and fellow students at Los Altos Junior College also said she would fail.
Her husband went along with the idea, but deep down he did not really believe his wife could succeed in the business world. For one thing, market studies showed that consumers strongly preferred crispy cookies. Debbi's cookies were soft and larger than normal and would have to be sold at much higher prices than regular bakery cookies.
She went ahead anyway but needed financial backing from a bank. She and Randy approached the Bank of America, their home mortgage lender. Their banker Ed Sullivan trusted the young couple to pay back a business loan, even though he expected the cookie business would fail. Debbi said in her book that the bank "trusted us, not cookies.... As things turned out, Ed Sullivan and his bank built Mrs. Fields' Cookies."
So at age 20 Debbi Fields started her first cookie store at Liddicoat's Market in Palo Alto. She signed the lease under the name Mrs. Fields' Chocolate Chippery. On August 18, 1977, she opened her store at 9 a.m., but by noon nobody had bought even one cookie. Frustrated and afraid to fail, she took samples to people on the streets. They liked the samples so returned to actually buy cookies. Providing free samples to potential customers remained a cornerstone of her business in the years to come.
Early Expansion
Debbi Fields initially was content with her one store. Then Warren Simmons, the builder of the Pier 39 shopping area in San Francisco, told her he loved the cookies and invited her to open a store in Pier 39. She at first turned him down, then a year later changed her mind. Pier 39 had reserved a prime space for Mrs. Fields' Cookies. Employees at her first store kept asking for opportunities to grow. Since her employees were like family, Debbi Fields felt a responsibility to them. With additional loans, the second store was opened in 1979. The Pier 39 store was so successful with its long customer lines that it caused problems for nearby businesses. The pressure was on to open more outlets.
An early crisis illustrated how the young company operated. Mrs. Fields refused to replace higher cost raisins with less costly but also less tasty dates. Debbi Fields explained that, "The point wasn't to make money, the point was to bake great cookies, and we sacrificed for that principle. From the very first, I set up a policy that we still follow today. Our cookies had to be warm and fresh and when they were two hours out of the oven, what hadn't been sold was donated to the Red Cross to be given to blood donors, or to other deserving charities, and we baked a new batch. We guaranteed everything we sold."
By 1979 the company had three stores but had reached a turning point. Working 16 hours a day to oversee everything, Debbi Fields said, "The cookie business had become a monster, demanding and demanding." She was so busy she had to schedule times to see her husband. She and Randy offered the rights to the company outside of California to Foremost McKesson, a large ice-cream maker, for $150,000, but the firm turned them down. They were crushed, but just kept on, wearily trying to handle the burdens of expansion. With the help of some key employees, they managed to survive. Eventually they received but turned down better offers for their firm, for they were learning how to handle a growing business.
Not all Mrs. Fields' stores however succeeded so easily. In 1980 the company opened its new store in the Ala Moana Shopping Center in Honolulu, but initially it failed miserably. Debbi Fields then had a kahuna or priest of the native Hawaiian culture bless her store. "The day after the ceremony, crowds of cookie buyers appeared; since that day, the Ala Moana location has been one of our most successful and profitable stores."
A few months later the firm reached a major milestone when it opened its first Utah store--in the Crossroads Mall in Salt Lake City. Debbi previously had been to Utah to ski, but the store was the idea of Michael Murphy, one of her company officers.
By the spring of 1981 the company operated 14 stores. At a training session, Debbi Fields was impressed with the fact that each store manager knew which cookies he had baked even when they were mixed up with those baked by the other managers. That experience assured her that the company training was successful.
In 1982 Mrs. Fields' Cookies recorded sales of about $30 million. By early 1983 the company had moved to Park City, Utah, and operated 70 stores from Honolulu to Chicago, and then it decided to open its first store in New York City.
When the firm began in the late 1970s, about 100 independent stores sold gourmet or specialty cookies. By 1983, according to Forbes, competition in this niche industry had resulted in just a few main companies. Mrs. Fields' Cookies competed against the Famous Amos Chocolate Chip Cookie Corporation, started in 1975 by Wally (Famous) Amos. By 1983 Famous Amos began a program to franchise 100 stores within two years. David Liederman began David's Cookies with a store in Manhattan and soon dominated the New York City market for specialty cookies. Other key firms included The Famous Chocolate Chip Cookie Company headed by President Frank Bonanno, the Original Cookie Company owned by Cole National Corporation, and Original Great American led by President Arthur Karp.
Although combined revenues from these firms were just $150 million in 1983, profit margins ran higher than in other industries, partly because of inexpensive materials. For example, batter for five pounds of cookies cost only $1.50, and cookies were relatively easy to produce. Frank Bonanno in the Forbes article estimated that "Pretax profits run anywhere between 10% and 20%."
For several years Debbi Fields rejected the idea of franchising her stores. She realized the cookies and other products could be duplicated but not the atmosphere of "love and caring" that was so important to the business. She also said in her book that she did not "want anyone else to get his hands on it." Although in 1987 she intended to retain "complete control and complete responsibility," economic necessity changed that approach in just a few years.
By 1987 Debbi Fields had created 14 different kinds of cookies: Pecan Whites; Milk Chocolate with and without walnuts; Semisweet Chocolate with and without walnuts; Semisweet Chocolate with and without macadamia nuts; Coco-Mac with coconut and macadamia nuts; Oatmeal Raisin Nut, called Debra's Special; Peanut Butter Dreams; Triple Chocolate that combined white and dark chocolate; Raisin Spice; White Chunk with macadamia nuts; and Royal Pecan. Her stores also sold five kinds of brownies, her own ice cream, candy, and muffins.
In 1987 Mrs. Fields' Cookies did well financially. It earned a profit of 18.5 percent on sales of $87 million, up from $72.6 million in 1986. The company in 1987 purchased La Petite Boulangerie, a chain of 119 French bakery/sandwich stores, from PepsiCo for $15 million. In just four weeks Randy Fields used specially developed software to help him and his wife reduce La Petite Boulangerie's administrative staff from 53 to just three individuals.
Several articles in business and computer magazines in the late 1980s praised Mrs. Fields' Cookies' innovative use of computer software to run its expanding cookie operations. The firm equipped each of its stores with inexpensive IBM-compatible computers that were linked by modems to the company's larger system in Park City. Computerization allowed the firm's retail stores to plan daily production schedules, monitor stocks and order materials automatically, communicate with headquarters using electronic mail, improve employee training, and handle payroll and other accounting tasks. Store managers spent about five minutes an hour and 20 minutes before and after work using their computers to help run their outlets. Headquarters staff in 1988 remained low at about 130 persons.
Although Mrs. Fields' Cookies management structure on paper included levels of middle management, Tom Richman in an October 1987 Inc. article wrote: "Randy Fields has created something entirely new--a shape if not the shape, of business organizations to come. It gives top management a dimension of personal control over dispersed operations that small companies otherwise find impossible to achieve. It projects a founder's vision into parts of a company that have long ago outgrown his or her ability to reach in person." Richman continued: "In the structure that Fields is building, computers don't just speed up old administrative management processes. They alter the process. Management ... becomes less administration and more inspiration. The management hierarchy of the company feels almost flat."
After Randy Fields computerized Mrs. Fields' Cookies, he began selling his artificial intelligence/store management software through a subsidiary, Fields Software Group. Burger King Corporation in 1990 became one of the software customers.
In the meantime, Debbi and Randy Fields received numerous honors. In 1988 the Utah Chapter of the National Conference of Christians and Jews honored the couple with its Brotherhood/Sisterhood Award for their many community contributions in business and philanthropy. Debbi Fields served on the boards of the Cystic Fibrosis Research Foundation, the Park City Educational Foundation, and Salt Lake City's LDS Hospital. She and her husband founded Mrs. Fields' Children's Health Foundation and donated millions to study children's diseases. Randy Fields was president of Riverview Financial Corporation, the Fields Investment Group, and the Fields Consulting Group. As the president of a firm with over 700 outlets worldwide, Mrs. Fields told the National Conference attendees that, "We are very proud to receive this award, but you must remember that each time you've enjoyed Mrs. Fields' Cookies, you're the one who's allowing us to give."
Her company, however, had a bad year in 1988 when it lost $19 million and closed 85 of its 500 stores, mostly in the eastern and southeastern United States. Some argued that these problems began in 1986 with Mrs. Fields' Cookies' initial public offering on London's Unlisted Securities Market. British investors purchased only 16 percent of the 30 million shares offered at $2.46 per share. After the company said it had set up a $15 million reserve to pay for store closings, its stock price decreased to just 44 cents per share.
The company also closed its Park City candy factory in order to concentrate on building its La Petite Boulangerie bakery business in Carson, California. To integrate the new subsidiary, Mrs. Fields' Cookies changed from having just cookie stores to full-service bakeries. Randy Fields admitted this was a difficult transition. In the February 13, 1989 issue of Fortune, he said, "We've been very ineffective at telling the British what we're trying to do." Some British food industry analysts said investors felt deceived after they were told it was a cookie company and then it changed directions.
In spite of these challenges, Randy and Debbi Fields continued to play a major role in developing the rapidly growing community of Park City, where more celebrities and about 300 Fortune 500 executives decided to move or build condominiums in the 1980s. For example, the couple developed the Summit County Industrial Park, anchored by tenant Lucas Western's $40 million aerospace manufacturing plant.
They also owned Park City's Main Street Mall, home of their corporate headquarters, the Egyptian Theatre, and other properties. In 1988 they closed their ice cream parlor so they could use the former Dudler Building for Mrs. Fields' Cookie College.
Gregg Goodwin, head of Park City Area Chamber of Commerce economic development, cited Randy and Debbi Fields as an example of corporate leaders who had moved their family and company to Park City to enjoy the area's high education levels, strong work ethic, low rates of alcohol use, and other lifestyle advantages.
In 1989 the company rebounded from a poor performance the year before. Revenues for the parent company, Mrs. Fields' Inc., increased eight percent from $120.4 million in 1988 to $129.7 million in 1989, while the firm recorded a 1989 net income of $1.5 million, a major improvement from 1988's loss of $19 million.
Also in 1989, Mrs. Fields' Cookies began making frozen cookie dough at its Carson, California plant and then shipping it to selected stores in Utah. Previously it had been the only major cookie maker that did not use frozen dough. In December 1989 the company began the process of selling its Carson plant to Van den Bergh Foods, a Unilever Group subsidiary. However, Mrs. Fields' Cookies kept the part of the plant that made its cookies.
Mrs. Fields' Inc. in 1989 reorganized by delegating certain management roles. A new executive committee included Chairman Randy Fields, President Debbi Fields, Larry Holman, Paul Baird, and Tim Pierce. Holman, an attorney, had joined the company as a senior vice-president in October 1989 to manage corporate development and real estate. Director of Operations Baird took over much of the responsibility of managing the firm's cookie stores, thus allowing Debbi Fields to emphasize development and marketing. Pierce was a CPA and company vice-president of finance. Even more significant changes would occur in the years to come, but in the meantime the company had to deal with damaging rumors or stories going around the nation.
The Urban Legend
Professor Jan Brunvand at the University of Utah and other scholars have shown that tales or stories about modern companies are sometimes told so often they become urban legends. Often not historically true, they were told by a friend of a friend in a chain of communication.
For example, beginning in the 1950s, a story called 'Red Velvet Cake' was told about a customer who paid New York City's Waldorf-Astoria Hotel a large sum of money for a red cake recipe. Starting in 1983, the story had mutated so that Mrs. Fields' Cookies was the culprit. In this version, 'someone had called the Mrs. Fields' company and asked for their recipe. When told that it was available for 'two-fifty,' the caller supposedly told the phone representative to send the recipe and charge it to her credit card, learning later that the price was $250 rather than the expected $2.50.'
Then, according to this tale disseminated by photocopies, the corporation's victim became upset and thus sent many bitter letters with the supposed secret recipe, and encouraged others to send out even more copies.
By 1987 Debbi Fields said in her book that, 'The rumor has really hurt the company.' She responded to this persistent account by placing notices in all her stores denying that the company had sold its recipe. Since average people (the folk) started and spread such legends and other forms of folklore, denunciations from the top usually had little impact. That happened with this story, which continued into the early 1990s and was also told about other firms such as Chicago's Marshall Fields, New York City's Macy's, St. Louis' Union Station, and Neiman Marcus stores in various cities.
One recipient of the photocopied urban legend tried the supposed secret recipe only to realize the resulting cookies tasted nothing like the real thing. But then Todd Wilbur spent five years trying to replicate Mrs. Fields' chocolate chip cookies and other fast-food products. He even published two cookbooks in the late 1980s and early 1990s with recipes that the Deseret News food editor called 'clones,' an unusual consequence of a modern whopper. Why would anyone believe such stories of a corporation selling its vital secret recipes?
Dr. Brunvand, the nation's leading expert on urban legends, wrote about this story in his fourth book, Curses! Broiled Again. He said in his 1991 newspaper column that this story about Mrs. Fields' Cookies and other companies was a 'classic recipe-scam story that refuses to die, no matter how often I debunk it or how vigorously companies deny it.... [It] illustrates two things: that many people love stories about corporate ripoffs, and that few can resist chocolate chip cookies.'
The popularity of Mrs. Fields' Cookies, the basis for the urban legend, was also seen in Congress in the late 1980s and early 1990s. Utah's congressmen about twice a year distributed free cookies, baked at local Mrs. Fields' stores in the Washington, D.C., area, to the hundreds of other representatives.
The 1990s
In 1990 Mrs. Fields' Cookies announced an agreement with the Marriott Corporation which allowed Marriott to own at least 60 stores to bake and sell the popular bakery products. Marriott gained the exclusive right to build Mrs. Fields' Cookies stores in airports, hotels, and highway travel plazas and pay the cookie company approximately five percent of its gross sales.
Mrs. Fields' in 1990 operated 45 international stores in Canada, Australia, Japan, Hong Kong, and the United Kingdom, and it planned to expand worldwide using various joint ventures or licensing contracts which promised profits without significant investment. By 1992 the firm had added stores in Thailand, and its seventh overseas market started in Mexico City with a licensing agreement with Pasteleria El Molino S.A.
In 1990 the company began remodeling some stores to allow more display space for new packaging products, cookie jars, and tins. To stimulate gift buying as well as cookie purchases, teddy bear maker Gund was commissioned to make little bears like those on the cookie tins. With new designs and decor, Debbi Fields intended to create boutiques or European-style cafés that were more colorful and exciting.
In 1993 Mrs. Fields' Cookies' stock was removed from the London Stock Exchange, and new owners reorganized the company. Four lenders, mainly the Prudential group, acquired almost 80 percent of the firm in exchange for writing off $94 million in company debt, while Debbi Fields retained a minority interest, remained board chairman, and accepted a salary cut of $150,000 to $450,000. Thomas Fey, formerly with Godiva and Pepperidge Farm, replaced Debbi Fields as president and CEO. The refinancing allowed the company to plan a major expansion of 100 new company-owned and franchised stores within the next year. Started in August 1991, the company's franchise option was praised by at least three publications: Success, Entrepreneur, and Self Magazine.
Although the company survived and retained the name of its founder, many wondered why Debbi and Randy Fields lost control. As Max Knudson, the business editor of Salt Lake City's Deseret News said in 1998, the couple 'seemed to have it all: beauty, brains, ambition, family values, a business growing exponentially--people couldn't get enough of them.'
Three reasons accounted for the huge debt and loss of control to outsiders. First, the company expanded too fast, and many stores could not afford their expensive rents. In many cases, the company had purchased property for its mall stores. Second, the nation's economic downturn in the early 1990s hurt Mrs. Fields' Cookies. Many customers no longer could afford her expensive cookies (about $1 per cookie) and the value of her real estate declined.
Last but not least, Debbi Fields's insistence on hands-on personal management and reluctance to franchise did not work. Francorp's Don Boroian, a Chicago franchising consultant, in the July 1993 Working Woman said he told Mrs. Fields' Cookies to franchise when it was still a young firm. 'When you're trying to expand as they did, with units in malls, you can't provide close enough supervision. By the time they decided to franchise, the concept wasn't strong enough because of increased competition, fewer customers, higher rents and a downturn in the economy. They needed to add more products, and they're finally doing that now.' By 1993 the company had added yogurt, coffee, and diversified with other products. It also had closed most of its mall stores by 1993.
Chairwoman Debbi Fields in early 1995 announced that the company planned to add 100 new stores overseas. At that time, five percent of the firm's 617 stores were located outside the United States. Fields said the company had franchise agreements in Indonesia, Australia, the Philippines, Canada, and the Middle East and also was targeting European and South American markets. Fields said the firm's long-term goal was to franchise all overseas operations.
Like many other firms, Mrs. Fields' Cookies in the 1990s used the Internet to stimulate sales. The company was one of over 100 businesses included on the Utah-based virtual mall called iShopper started in July 1996.
In the 1990s the company moved its headquarters from Park City to offices on Bearcat Drive in Salt Lake City. In the summer of 1998 it moved again, this time to a new 30,000-square-foot complex in Salt Lake City's Cottonwood Corporate Center. However, it kept its facilities on Bearcat Drive and Lawndale Drive for about 40 employees. Its mail-order operation remained on Bearcat Drive.
Meanwhile, the family that started the business ended in divorce. Debbi Fields married Michael Rose, the retired chairman of Harrah's Entertainment, on November 29, 1997, and moved from Park City to live with her husband in Memphis, Tennessee. Debbi Fields Rose served as a consultant to the firm she founded and also participated in a public television show called Great American Desserts. Randy Fields continued to live in Park City and work in the software industry. Thus the firm persisted even as what Deseret News business writer Max B. Knudson called the 'media darlings' broke up, after years of conflict and tension.
The company continued to expand in 1998 under the ownership of Capricorn Investors and the leadership of Chairman Herbert S. Winokur, Jr., and President/CEO Larry A. Hodges. Effective November 23, 1998, Mrs. Fields' Original Cookies purchased Denver-based Pretzelmaker for an undisclosed amount. This acquisition added 229 pretzel stores to the firm's already existing 1,324 cookie and pretzel stores.
