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A Bakery Looks for Sweet Success
Aired May 14, 2005 - 11:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BETTY NGUYEN, CNN ANCHOR: Good morning, I'm Betty Nguyen at the CNN Center in Atlanta. "THE TURNAROUND" with Ali Velshi beings in just a few seconds, but first, a check of the headlines right now in the news.
A CIA predator drone hunts down and killed a key al Qaeda operative. That is according to CNN sources. It reportedly happened near the Afghan/Pakistani border. Now, sources say the missile from a predator drone, like this one, killed Haithem al-Yemeni earlier this work.
The deadly violence in Uzbekistan intensifies. Reports say protesters have taken over government buildings in a village bordering Kyrgyzstan. Meanwhile, human rights monitors say government soldiers have killed hundreds of people. The deaths come amid violent protests aimed at ousting Uzbekistan's president.
Pushing Mid East peace, President Bush will meet with Palestinian President Mahmoud Abbas later this month. A spokeswoman for Abbas says he'll have talks with the president during a three-day visit to Washington. The leaders are expected to discuss the U.S. led road map to peace.
We'll have more news coming up in just 30 minutes. "THE TURNAROUND" with Ali Velshi begins right now.
ALI VELSHI, HOST (voice-over): Next on THE TURNAROUND, a baker who's trying to turn her passion for sugar into a successful business.
DENISE VICKERS, OWNER, WALNUT CREEK BAKING COMPANY: It's very expensive to set up a food business.
VELSHI: A CEO who has built an empire on frozen desserts.
GARY ROGERS, CHAIRMAN/CEO, DREYER'S GRAND ICE CREAM: When you make your living selling ice cream, life can't be too bad.
VELSHI: Can the brains between an ice cream colossus help this struggling baker?
ROGERS: You are in dangerous territory, financially.
VELSHI: THE TURNAROUND begins now.
The eggs are cracked. The flour is sifted. The batter is whipped and the icing is on the cake. There are more than 6,000 retail bakeries in the United States bringing in more than $10 billion in sales each year.
(on camera): Welcome to THE TURNAROUND. I'm Ali Velshi in Walnut Creek, California, just outside of Oakland where life is sweet, at least for Denise Vickers who runs the Walnut Creek Baking Company. Well, Denise is a self-described sugar addict who has run this bakery for about two and a half years. The food is great but she has some challenges, so we thought we'd introduce her to somebody who also makes their money selling sugar, the CEO of one of the country's largest ice cream makers. They'll spend three days together and we'll see if they can't come up with a plan of success for her.
(voice-over): It's one of the coolest treats around. In 2002, U.S. sales for ice cream and frozen desserts exceed $20 billion. More than 1.6 billion gallons of price cream are produced each year. That's enough to fill 6,400 Olympic sized swimming pools. And chances are if you have ever eaten ice cream, you've eaten Dreyer's.
ROGERS: When you make your living selling ice cream, life can't be too bad.
VELSHI: Gary Rogers is chairman and CEO of Dreyer's Grand Ice Cream. In 1977, Gary and a former business partner purchased Dreyer's for $6 million. They turned it into an empire. In 2004, Dreyer's reached $1.9 billion in net sales.
ROGERS: Ice cream is part of Americana.
VELSHI: West of the Mississippi, their ice cream is known as Dreyer's. East of the Mississippi, it's Edy's. They also license the Haagen-Dazs and Nestle brands. Producing more than 152 million gallons of ice cream per year, Dreyer's Grand Ice Cream is one of the leading ice cream manufacturers in the country.
VICKERS: I am the owner and manager for Walnut Creek Baking Company. It's a project of mine that I've wanted to do for a long, long time, since I was in college and worked at a bakery.
VELSHI: Three years ago, Denise Vickers took her passion for baking and turned it into a reality. With a degree in restaurant management, and a certificate from the California Culinary Academy in her hand, Denise opened her bakery.
VICKERS: We do have a wide variety of products: breakfast items, scones, sun rolls, muffins. We do a lot of custom cakes, a lot of wedding cakes.
VELSHI: Denise prides herself on having a bakery that has something for everyone but that comes at a price.
VICKERS: We're just starting to reach the point where we're becoming profitable. We have a lot of debt. It's very expensive to set up a food business.
VELSHI: After watching Denise's application tape, her mentor Gary Rogers knows first hand what she's going through. He, too, has faced financial hardships in the past.
(on camera): You kind of feel that going through a bit of failure actually helps you be more successful.
ROGERS: You know before I came to Dreyer's, I went broke in the restaurant business. I lived for a year with no income, four kids at home and no income and almost no savings. You know, I had to face reality and decide that that business wasn't going to make it.
VELSHI (voice-over): But Gary learned from those challenges. Some of the same challenges Denise now faces.
Ten thirty, Day 1 of this turnaround, Denise is busy helping customers, arranging cakes in the display case and making her shop presentable. Then her mentor walks in.
ROGERS: You must be Denise.
VICKERS: Hi. Yes, I am.
ROGERS: Hi, Gary Rogers.
ROGERS: Nice to meet you.
VICKERS: Nice to meet you.
ROGERS: I brought you a present.
VICKERS: You did?
ROGERS: I'm the CEO of Dreyer's Grand Ice Cream.
VICKERS: Oh, cool.
I was kind of like Dreyer's, wow, that's huge. Dreyer's is huge.
Well, do you want a tour?
ROGERS: Yes, I'd love a tour.
VICKERS: All right.
ROGERS: What percentage of your sales occur in the retail shop?
VICKERS: Retail shop? Oh, gosh, like 95 percent.
VELSHI (on camera): Denise is passionate about her business and she should be. She has a fantastic bakery here and she's got some great space just outside of here where you can enjoy her cookies and her cakes with a cup of coffee. But like so many small business owners, she's got a lot of fixed costs. So she's in with her mentor, Gary Rogers from Dreyer's right now and they're looking at ways that she might want to think about reducing some of those costs or increasing her sales so she can make more money.
ROGERS: As I look at your financials over the first couple of years, I think any hard-nosed, rational finance person would say, you are in dangerous territory, financially.
VELSHI (voice-over): Denise has two outstanding loans with her local bank; an additional term loan for $250,000 helped her start up her business. Later she took a line of credit for $100,000 for some extra cash.
ROGERS: You're very dependent on that bank relationship.
ROGERS: You've been unprofitable through the last year.
ROGERS: So you not only need to become profitable, but you need to become profitable enough that you can pay off that debt.
VELSHI: Gary knows he only has a short time to get Denise jump- started toward that important goal, so he initially gives her four tasks to complete over the next three days.
ROGERS: Take a very hard look at your cash flow.
VELSHI: Denise needs to know where her money is going so Gary asks her to prepare a cash flow projection for the coming year.
ROGERS: No. 2, sit down with your banker.
VELSHI: It's important for Denise to build a stronger relationship with her banker. Her line of credit is almost up for renewal and she needs to renegotiate the terms.
ROGERS: No. 3, look at other successful entrepreneurs. We've got three of them that I happen to know pretty well.
VELSHI: Getting exposure to other successful food businesses can give Denise perspective on her own operation and get her thinking about goals to work toward in the future.
Denise's fourth task is to develop a vision for her company.
ROGERS: This is a very key stage in the building of a business. The decisions you make at this point will determine whether you're going to achieve your dream or whether you'll look back and say, well, it was a good experience.
VELSHI: Coming up, Denise realizes she can't be all things to all people.
VICKERS: I'm actually losing money by trying to do too many things.
VELSHI: And later, Denise agonizes over her meeting with the bank.
VICKERS: I would rather have a limb severed than go talk to the bank.
VELSHI: Next on THE TURNAROUND.
VELSHI (voice-over): Welcome back to THE TURNAROUND. We're in Walnut Creek, California, where moments ago, baker Denise Vickers met her mentor Gary Rogers, the CEO of Dreyer's Grand Ice Cream.
ROGERS: What percentage of your sales occur in the retail shop?
VICKERS: Oh, gosh, like 95 percent.
VELSHI: It's still Day 1 and already it's been a busy morning. Denise gave Gary a tour of her Walnut Creek Baking Company and then they sat down and talked. He gave Denise her assignments for this turnaround.
ROGERS: Take a very hard look at your cash flow. Sit down with your banker. Look at other successful entrepreneurs.
VELSHI: And finally, to outline a three-year plan for her company. But it's meeting with the bank that really has Denise anxious.
VICKERS: We have a line of credit that is being called due. We are trying to get them to extend it and not to close it. That is where the delicacy comes in because if they are uncomfortable, if they can easily turn around and say no, we're not going to renew this, and then I've really got cash flow problems.
VELSHI: Cash flow is the life blood of any business. It's the money that fuels the day-to-day operations: supplies, wages, equipment and creditors. If a business can't make the payments when due, lenders run away and even a profitable business can grind to a halt.
ROGERS: You have to have sufficient capital or enough of a cash flow stream that will allow you to persist until you get to a revenue level that crosses the break-even point.
VELSHI: That's why Denise brings in her accountant and business adviser Laurie Wetzel.
VICKERS: I rely heavily on Laurie's expertise. I wanted to immediately get a hold of her and say, do you think it would be suicide to approach the bank at this time?
LAURIE WETZEL, ACCOUNTANAT, WALNUT CREEK BAKING COMPANY: We're in the process right now of doing the projections. We have made some tremendous strides, positive strides from the financial side.
VELSHI: After running all the numbers, both Denise and Laurie feel Walnut Creek Baking Company is just about breaking even but cash flow is still tight. So are they ready to go to the bank?
VICKERS: The banker is setting an appointment. How do you feel about that?
WETZEL: I would say I'm -- I have reservations about doing that.
VELSHI: Both Laurie and Denise feel the meeting with the bank is a delicate situation. Since Denise needs to renegotiate her line of credit, she needs the bank on her side and she's afraid that meeting with them prematurely will only blow her chances.
WETZEL: I don't want us to jeopardize what we're trying to do. And I'm a little concerned because the bank is really not a partner with us.
VELSHI: For now, Denise puts the bank meeting aside to focus on the next part of her turnaround. Like many entrepreneurs, Denise has fallen victim to being everything to everyone.
VICKERS: Especially when you're starting out, you will do anything for a sale.
VELSHI: But Denise also needs to focus on marketing so she's meeting Tyler Johnston and Suzanne Ginestro, two members of Dreyer's marketing team who just developed and are marketing Dreyer's new product, Dibs. They begin by asking Denise if she has any top- sellers.
SUZANNE GINESTRO, BRAND MANAGER, DREYER'S GRAND ICE CREAM: Do you have any that are best sellers or the local favorites?
VICKERS: Oh, absolutely. Cream cheese brownies are huge sellers. Chocolate chip cookies is a perennial favorite. It's something that's just mind numbing how many we go through.
TYLER JOHNSTON, EXECUTIVE VP MARKETING, DREYER'S GRAND ICE CREAM: Which of all of these do you sell the least of?
VICKERS: At this point, probably cherry almond scones of the breakfast things.
GINESTRO: Would you say the majority of your business comes from this grab and go in the case or from the cake business?
VICKERS: More from the cake and from special orders. Certainly, the grab and go is, you know, it's kind of our bread and butter. It's a very consistent part. The cake business is the part that's really been growing. The specialty items, things like wedding cakes, where it's really growing and expanding.
VELSHI: Despite the fact that Denise's cake sales are growing, she doesn't want to give up the grab and go side of her business. Tyler and Suzanne aren't suggesting Denise has to focus on just one thing. She needs to identify the type of customer her business depends upon. By offering too many products, Denise and her company could get burned.
GINESTRO: When you walk in the door, you have all things for all people. And I think our overall impression was what do you stand for?
VICKERS: I'm actually losing money by trying to do too many things.
VELSHI: Denise feels that choosing one product to focus on is like choosing one type of customer and that's exactly what Tyler and Suzanne have in mind. But choosing is tricky. As with the Dibs that Tyler and Suzanne helped develop, Denise's target customer could be just about anyone with a sweet tooth.
GINESTRO: With Dibs, we learned that everyone in the household eats Dibs. They love them. So we had a challenge, who are we going to market this to. We chose to spend our time focusing on moms because we know she's the one who's the gatekeeper and brings it into the house.
VELSHI: To help Denise with her marketing strategy, Tyler and Suzanne give her an assignment that will help her focus on a brand and a target customer. They want Denise to begin by choosing two types of target consumers and decide what products will appeal to them. Then Denise needs to price those products and figure out the best way to present them and to promote them.
VICKERS: This was going to make my brain hurt.
VELSHI: The meeting is over, but Denise's day is far from done. She still has her doubts about setting up that meet with her banker. So Denise places a call to Gary, and he reassures her it is the right thing to do.
ROGERS: Look you should not invite your banker to a meeting with us unless you think it's going to be helpful to you. My take on it is that it will be helpful.
VELSHI: Gary thinks the meeting with the bank will give Denise an opportunity to show how her business has grown and to reassure them that she is a good loan risk.
Coming up on THE TURNAROUND, why hasn't Denise called the bank?
VICKERS: This is a life or death kind of thing.
VELSHI (on camera): Day 2 of this three-day turnaround here in the Walnut Creek Baking Company in Walnut Creek, California, just outside of Oakland. Our proprietor, Denise Vickers, was given a bunch of tasks by her mentors yesterday and she got started on most of them. She seems to be procrastinating on one of them, and it's likely the one that most small business owners in her situation would be apprehensive about. It's the call to her banker.
VICKERS: If we put pressure on the bank, is that going to make them mad and have them tell us, you know, go take a flying leap? This is a life or death kind of thing. If we screw this up it could potentially ruin us. Well, any conversation with the bank is absolutely critical for the life and death of the organization. I am scared of them because they do have the power over the purse strings if they really want to be nasty.
VELSHI (voice-over): Whether or not the bank would actually be nasty and call in Denise's loans is unclear. But what is clear is that Denise's relationship with her bank is rocky.
VICKERS: I know about baking. I'm comfortable with that. You know people I'm fine with. But the bank, I -- you know what are the nuances of that and that's where I really rely heavily on Laurie.
VELSHI: Denise's accountant, Laurie, has spent the night going over sales figures for the bakery.
WETZEL: And I noticed the wedding cakes are really jumping.
VICKERS: I was pretty shocked as to how much actual revenue we've done in wedding cakes on some of these (UNINTELLIGIBLE).
VELSHI: They now go over the company's projections. If they get a meeting with the bank, it's something they'll need to show them on Day 3 of this turnaround.
WETZEL: I think that the numbers are really pretty solid. I'm comfortable with the projections on the revenue. What I am projecting is so far below what we actually did. If you set the bar so high, you're setting yourself up for failure.
WETZEL: That's the one thing we haven't done. So we've approached it in a very conservative manner, which I think is good.
VELSHI: Even though their conservative projections show that Walnut Creek Baking Company will be profitable, Denise doesn't have a lot of cash lying around.
WETZEL: We are operating at a deficit cash flow right now.
VICKERS: Right. WETZEL: How are you going to handle that?
VICKERS: Right. So we need working capital.
VELSHI (on camera): I've been eavesdropping.
VICKERS: No problem.
VELSHI: I think you've said, you're at a turning point or -- you really are.
WETZEL: She's at the crossroads. By now going to the bank and presenting these, these are our positive notes. The bank isn't at risk anymore. Their exposure is almost none.
VELSHI: Right. Now, it's in their interest to make sure you stay in business.
VELSHI (voice-over): Even though Denise still has strong reservations about meeting with the bank, she finally musters the nerve to set up an appointment.
VICKERS: I have a very odd last-minute request, and I am hoping maybe you can help me out. My mentor is the head of Dreyer's Ice Cream and he gave me some suggestions as to things that we can do to kind of help streamline the business. One of his suggestions was if -- was there any possibility to be able to set up a meeting either this afternoon or tomorrow? How is that for out of left field? Thanks, Denise. Ok. Bye-bye.
That was a little fast talking.
VELSHI: As part of her homework, Denise was asked to meet with three local businesses with baking routes. Gary arranged appointments for her with Il Fomaio, Sibby's Cup Cakery and the Bread Garden. So Denise gets back on the phone, this time with Sibby Thompson, the owner of Sibby's Cup Cakery. This is the first contact she makes from Gary's list of local entrepreneurs.
VICKERS: You've got a whole lot of publicity that is absolutely fabulous and I was just really wondering how you were able to get that publicity and -- maybe not your secrets, but what are some of the things you'd be willing to share. OK. That sounds like a cool thing. Thanks a lot, Sibby. Bye-bye.
VELSHI: It's 1:00 p.m. With her phone call with Sibby Thompson over, Denise meets with her mentor Gary Rogers and another entrepreneur Gary thinks she has something to learn from.
(on camera): Denise has had a tough morning. She's had to come to terms with the idea that she is going to have that all-important meeting with her banker. Now that she knows that's happening, she's back into the stuff that she likes doing. She's talking to Larry Mindel who's been very successful in the restaurant and bakery business about ways to expand her bakery and make more money.
(voice-over): Mindel has run Il Fomaio since 1987. What started as a few small bakeries losing money is now 23 restaurants strong with revenue in excess of $24 million.
LARRY MINDEL, FOUNDER, IL FOMAIO: It's important for you to know that where you are today is where I was a long time ago.
VELSHI: Since Larry has figured out what makes his business click, he thinks it's time for Denise to do the same and he hones in on brand identity.
MINDEL: From what I'm told, your passion is in wedding cakes. Is that true?
VICKERS: Yes, that is true.
MINDEL: Driving your wedding cake business for someone like you could be, I'm not going to say easy, because nothing is easy, but there are wedding shows.
MINDEL: You need to go to them.
ROGERS: You know it's got to feel right. It's got to fit your concept.
VICKERS: Oh, absolutely.
ROGERS: But you also have to think about what the impact is on your economics. That's got to be first and foremost at this point.
VELSHI: Before this meeting wraps up, Denise tells Gary that she did put a call in to the bank.
VICKERS: I did talk to them and we've got a meeting set up for tomorrow morning.
ROGERS: Oh, really? No kidding.
VICKERS: Yes, so...
ROGERS: Well, you don't fool around.
VICKERS: Nope. Not at all.
ROGERS: That's great.
VELSHI: Coming up, Dreyer's top money man moves in to prep Denise for that key bank meeting.
ROGERS: He knows the banking business. He knows the equity business. He's a real pro.
VELSHI: And later, Denise braces for disappointment. VICKERS: I don't have the feeling that they really want to partner with us.
NGUYEN: I'm Betty Nguyen at the CNN Center in Atlanta. "THE TURNAROUND" with Ali Velshi continues in just 60 seconds but first here's a look at the headlines right now in the news.
A missile attack killed a key al Qaeda operative inside Pakistan, according to knowledgeable sources. That missile was fired from a CIA operated predator drone aircraft. Haithem al-Yemeni had been under investigation and observation in the hopes that he would lead authorities to Osama bin Laden or other top al Qaeda leaders.
Reports out of Uzbekistan are that hundreds of people have been killed by soldiers after anti-government protests there. The violence began several days ago when people stormed a prison angry over the arrest of several prominent business owners. Uzbekistan's president blames the violence on Islamic radicals.
Now to Capitol Hill -- Democratic Congressman Robert Wexler of Florida plans to introduce legislation Monday aimed at saving social security. His proposal in part calls for an increase in payroll taxes on people making more than $90,000 a year. It is the first time a Democrat has offered an alternative to President Bush's plan.
We'll have more news at the top of the hour with "CNN LIVE SATURDAY." "THE TURNAROUND" with Ali Velshi continues right now.
VELSHI (on camera): Welcome back to THE TURNAROUND, I'm Ali Velshi. And it is Day 2 of this three-day turnaround in Walnut Creek, California, just outside of Oakland. Now, we're at the Walnut Creek Baking Company where the owner, Denise Vickers, has spent this morning dealing with her finances.
VICKERS: Right now, it feels like boot camp.
VELSHI (voice-over): Over the past day and a half, Denise has been inundated with information. This morning, she managed to tackle two of the assignments given to her by her mentor Gary Rogers, the chairman and CEO of Dreyer's Grand Ice Cream. Denise also met with Laurie Wetzel, her accountant and business adviser, to come up with a cash flow projection. And she's contacted two of the three entrepreneurs that Gary has recommended to her. It's a lot to digest and Gary knows she still has reservations about her upcoming meeting with the bank to discuss renegotiating her line of credit so he's arranged for Denise to meet with Bill Collett, the treasurer for Dreyer's Grand Ice Cream.
ROGERS: I mean he knows the banking business. He knows the equity business. He understands balance sheets income statements. I mean he's a real pro.
VICKERS: Come on in. Have you been inside yet?
BILL COLLETT, TREASURER, DREYER'S GRAND ICE CREAM: Yes, I'd like to see the business.
VELSHI: Denise and Bill get right to the task at hand, discussing tomorrow's meeting with the bank. Because Walnut Creek Bakery is only on the cusp of profitability, the bank might consider the company a risk and they may insist on a higher interest rate when she goes to renegotiate her line of credit. Even worse, Denise fears they may leave her high and dry and end their relationship with her altogether.
COLLETT: One of the things from my dealings over the years with banks is being able to give them a reason to understand why things are different and why things can be different in the future, and why they are better off staying with you as opposed to going away from you. That's the key to the whole thing.
COLLETT: So I think you go in, and you make the affirmative case that here's where we are today. Here's what our current cash generation is. Here's our current situation. And here's what we think we can do over the next 12 months. Walking in the door with a really clear explanation of how you're going to generate cash will be a real key...
COLLETT: ...to them.
VICKERS: He gave me a lot to think about. So now I want to put together a much more of a presentation instead of just taking numbers to say, you know, we have done these different bullet points and all of these things are going to make us more successful.
VELSHI: It's 5:00 p.m. Back on assignment, Denise now arrives for her meeting with David Morris, the owner and president of the Bread Garden. It's a bakery that's been open since 1973. He's the third entrepreneur that Gary has asked Denise to meet with.
VICKERS: I'm just kind of curious to talk to you about a couple different aspects of your business. You have obviously been here a long time. You've had great success, and just wondering what you think some of the keys to that are, and any pearls of wisdom you can give to me.
VELSHI: The biggest single piece of advice David can offer is to always listen to your customers.
DAVID MORRIS, OWNER, THE BREAD GARDEN BAKERY: I have direct contact with my customers. I let the customers tell me what they want to buy, like, for example, people have been suggesting, so I designed a 100 percent whole wheat baguette. And it's being a big hit. VELSHI: Her last meeting with an entrepreneur is complete but Denise's night is far from over. Not only does she have to prepare for tomorrow's big meeting with the bank, she also has to finish developing her marketing strategy.
VICKERS: At the end of Day 2, my brain is spinning again. I still have a whole bunch of homework to do. I've got to finish the things for Suzanne and Tyler. I've got to prep for the bank meeting. I've got to, you know, get all these different things ready, and I'm just hoping that I can stay awake long enough and have enough energy to carry through to get all the pieces together.
VELSHI: Coming up, will Denise get bad news at the bank?
VICKERS: I'm excited. I'm nervous. I definitely have some anxiety about it.
VELSHI: Next on THE TURNAROUND.
VELSHI (voice-over): It's 9:00 a.m. Denise and her accountant arrive at Summit Bank where they meet up with Gary.
ROGERS: Good to see you.
VICKERS: I'm excited. I'm nervous. I definitely have some anxiety about it.
VELSHI: But the Dreyer's team has coached Denise on how to ask the bank to keep her line of credit open.
(on camera): It's the beginning of Day 3 of this three-day turnaround. Now this day starts with a crucial meeting for Denise Vickers. She's going in to meet with her bankers with Gary Rogers of Dreyer's to try and figure out if they can work out some better terms for that loan that's been hanging over her head. We'll find out later how she does.
VICKERS: I brought along a couple of cakes. I really wanted to have that almost in your face illustration. This is what we do. This is what we're capable of and have that reminder there in front of us as we were talking.
VELSHI (voice-over): Moments later, Denise Dodini, Summit Bank's vice president joins Denise, Gary and Laurie in the conference room.
WETZEL: Hi. Hello. Good. How are you?
ROGERS: Have you ever seen a cake like that, Denise? I have never in my life seen a cake like that.
DENISE DODINI, VP, SUMMIT BANK: Beautiful.
VELSHI: The meeting begins with an update on the positive change to the bakery's financial situation. Denise's secret weapon isn't the fancy cake. It's the cash flow projection Gary prompted her to do.
VICKERS: Sales have continued to increase dramatically. January of 2005, sales increase by 81 percent over what they were last year.
VICKERS: And February was in the 40 percent range, which averaged out to 60 percent so far for this year. So we're still tracking exceptional growth.
DODINI: What's causing that growth?
VICKERS: A lot of it is word of mouth, that we are getting known within the community, very good reputation that we have. We have a very high level of repeat customers. We had some positive effects with some of the advertising we've been doing and we're booking a ton of wedding cakes for the upcoming year.
VICKERS: And we brought our labor down by a full 10 percent.
DODINI: That's pretty significant.
VICKERS: We're going to have a 60 percent decrease in our insurance costs with comparable coverage. So between the increases in sales and the decreases in costs, we did what I feel are relatively conservative projections. You can see that we show strong profitability through the year.
DODINI: What makes you confident in these numbers? Do you feel that you've identified the areas that you needed to manage more efficiently and that you've imposed the controls to do that?
VELSHI: Denise feels she's made her case and she no longer seems intimidated. It's time to bring up her line of credit. Confident in herself and her company's prospects for profitability, Denise not only asks the bank to extend her loan, she asks for more money.
VICKERS: We would like to not only keep the line of credit, but we would also like to request an increase in the line of credit to $200,000 so that we have sufficient working capital to go forward.
DODINI: How did you come up with the $200,000 and why do you need a line of credit as opposed to some other type of installment credit because a line of credit, you borrow, you pay back, you borrow and pay back?
VICKERS: Right. DODINI: You're talking about financing growth. That's a permanent investment in the business. So a line of credit probably isn't the most effective financing vehicle for you.
VELSHI: The bank would prefer Denise take an installment loan, borrowing a set amount of money and repaying it in a fixed amount of time. As the loan balance decreases, so does the bank's risk. But Laurie doesn't think it's the best idea for Denise.
WETZEL: I'm not sure that I can give her that advice at this particular time to enter into something that's going to require a fixed payment again because I don't want us to have to come back to you and say, right now cash is a little tight can you give us some concession.
VELSHI: Denise Dodini struggles to find a middle ground that will make both the bank and the baker happy.
DODINI: Maybe what we need to look at is something that offers a little more flexibility, but provides the bank with some guarantees, some support. One of the things we can look at would be a government guarantee, you know, through the state.
VELSHI: The bank isn't closing the doors on Denise just yet.
DODINI: What I'd like to do is No. 1, get the information regarding how we're coming up with that $200,000 number so that we're in agreement on how the funds are going to be used and then I'd like to set up a meet with a representative from the state program, and look at what kind of financing structure we can put together to facilitate your future financing needs.
ROGERS: Let me just say that as a newcomer to this situation, the attitude you're showing this morning is both appropriate and encouraging. I think you've got an entrepreneur here who has all the makings for success. My sense is that as you work through this, you're going to find a solution that is appropriate to everybody.
DODINI: So then we'll talk on Monday.
ROGERS: That's great.
WETZEL: Thank you.
VICKERS: Thank you, Denise.
VELSHI: The banker seems willing. The mentor is optimistic. But Denise is not entirely happy with the outcome. The bank didn't make a decision today on the line of credit, a decision she was looking for.
(on camera): Do you feel like there's some progress? VICKERS: I'm not sure that we're further ahead. We're not further behind, so I don't really feel that there was any harm done. But I'm not completely convinced that we're getting to be where we need to be. I don't have a feeling that they really want to partner with us. I was just hoping the bank would cut me a check and we would be done.
ROGERS: A bank is not a partner. And a bank will never be a partner. They've got to be confident they're going to get their money back. And, you know, that's just the way a bank works. I'm very confident that someone is not going to pull out on Denise at this point. And to me, that's a big win.
VELSHI (voice-over): With the meeting with Summit Bank behind her, Denise needs to get past her frustration and prepare to meet with Gary and his team one last time. She'll review all five assign assignments, her pitch to the bank, her meetings with the entrepreneurs as well as her three final tasks: her cash flow projection, her new marketing strategy and the company's three-year vision. Only then will they know if Walnut Creek Baking Company is making a turnaround.
Coming up, Denise doesn't see eye to eye with her mentor.
VICKERS: It almost seems like he was saying I should be glad that they were actually still my bank.
VELSHI: Plus, Gary's final piece of advice.
ROGERS: This is the most important message that I have for you.
VELSHI: Next on THE TURNAROUND.
VELSHI: It's 11:15 a.m. at the Oakland headquarters of Dreyer's, one of the nation's top ice cream companies. Denise Vickers, the owner of the struggling Walnut Creek Baking Company has just arrived. She's about to meet with her mentor, Gary Rogers, the CEO of Dreyer's and his team.
VICKERS: It's just like, holy cow. I have to talk to all of these people.
VELSHI: Denise gathers her nerve and hands out a written summary of her homework. Task number one, drawing up a realistic cash flow projection for her small business.
VICKERS: One of the problems with doing projections, even though we're on a great growth track, is that if I actually project what I really think we're going to do, I'll get laughed out of the bank's office. VELSHI: Denise's second assignment was this morning's meeting with the bank. Despite the progress her mentor thinks she made, she is still suspicious about banks.
VICKERS: I can't help but be disappointed because I don't like -- I would rather have a limb severed than go talk to the bank.
ROGERS: You know that was clear with your reaction afterwards but you did a really good job with the bank. I wanted to tell you that.
VELSHI (on camera): Well, Denise said to me -- I've got to tell you this. This has got to be one of the all-time best things I've ever heard from a small business owner -- why can't I be one of those people in the bank's commercials about how they not only are your partner, they go to your kid's ball games.
VICKERS: Oh yes, they love you. Yes.
VELSHI: They clean your house for you. Is -- I mean banks do certainly market themselves with the impression that it's this warm fuzzy.
ROGERS: And it really isn't. When you get down to where Denise is this morning, there's not much warm and fuzzy.
VICKERS: It almost seemed like he was saying I should be glad that they were actually still my bank. I did not think that they were going to tell me to take a hike, but at the same time, I don't really share his enthusiasm for the relationship that we do have.
ROGERS: They are not a partner with Denise. They are a lender. And I think this morning was a good lesson for her.
VELSHI (voice-over): Next on the agenda, Denise's meetings with three entrepreneurs.
VICKERS: It shows how you can have success with different models. It also showed there's a bunch of people out there who are willing to offer insight and advice if you're just willing to go ask.
JOHNSTON: I just think that's really important. So I urge you to, whenever you can, to get out, especially meet other people in the bakery business, and take a breath of air. Sometimes you look at market research and say, I can't afford to do that. That sounds like a big undertaking. But it's simply getting out and having a curiosity about it, other examples to learn from.
ROGERS: We're great ones here at Dreyer's for -- we call it creative swiping.
VELSHI: For her fourth assignment, Denise came up with a marketing strategy. Choosing two target customers and specific products she focused on to attract them.
VICKERS: The target consumer is going to be the person in a household who is going to be purchasing cakes. Usually that is the female head of household, be it mom, be it best friend, whatever. Those are the people who are driving the sales. Pricing is going to range, of course, depending on how many people they're serving, but approximately $3 a serving for a dessert. The other target being brides. Brides are on a completely different plane when they are looking for wedding cakes.
VELSHI: Still, Denise does not want to let go of her grab and go customers. She hopes to increase those customers by improving the bakery signage.
VICKERS: If you can't read it -- you can't even read it from the store next door. It needs to catch people's eye, that when you're looking the sidewalk, this is us. Or when you're driving by, there's a bakery here.
VELSHI: Denise and her staff have updated the bakery's brochure. Dreyer's brand manager Suzanne Ginestro thinks it's a good start, but she wants the handout to really reflect Denise's personality.
GINESTRO: Your passion for sugar, why you got into this business and where it all started because I think that will add a face to this business for people. And I think people would rather buy from real people.
VELSHI: Denise could also market with her unique powers of description.
(on camera): And you talked about some people liking the textures in cakes.
VICKERS: I'm talking about either the creaminess or the silkiness of a filling and the balance of the coarser texture of the cake.
VELSHI: I've never ever wanted a cake more in my life than when I heard you saying that. I've never heard anybody talk about things like that. That's just fantastic.
VICKERS: I mean the Eskimos have 1,000 words for, you know, ice and snow and I have 1,000 ways to describe different things. I -- you know I try very hard to be able to give a good picture of any of the products that we offer.
VELSHI (voice-over): And finally, determining Walnut Creek Baking Company's direction for the next three years. Denise decides to play to her strengths. Cake is her company's future.
VICKERS: The direction that I want to take the business is to have us be synonymous in people's minds with cakes. All of the other things can be nice fill. But cakes is what we do exceptionally well. That's what makes us unique.
VELSHI: Larry Mindel likes the sound of it.
MINDEL: A tag line opportunity or an idea might say something like, Walnut Creek Baking Company, the cake people. If you add other things, two years from now or five years from now, you still have the cover of that name.
VELSHI: As the meeting comes to a close, Gary and his team are proud of Denise and the progress she's made during this three-day turnaround.
COLLETT: So you have taken a lot of input and taken a lot of care to try to figure out how to make this business bigger and more profitable, quickly.
VICKERS: Well, yes, because I, more than anybody, want it to succeed.
ROGERS: That's very clear.
VICKERS: I was pleasantly surprised that they kind of had that wow look, like, wow, she really did all these things.
MINDEL: I am amazed just in the few days that you have had here, that you can bring these pieces together in the kind of work that you have.
ROGERS: This is the most important message that I have for you. And that is, have that goal. Make sure everyone understands it. And then live your life day-to-day. Get up every morning and say, thank God I have this challenge. Thank God I can do what I love.
MINDEL: Most businesses end up being successful because there is someone there that believes in them so strongly that they will not let them fail. And that's the impression I have of you. So go get them, Tiger.
VICKERS: Thank you.
VELSHI: Denise says a final good-bye to the experts who have guided her through the three jam-packed days. It's something she will never forget.
VICKERS: The whole experience is surreal. It's very intense. It's very energizing. I have the option of picking and choosing what things I'm going to use and do my best to make it succeed.
ROGERS: There are a few people, I think, who get up every morning and say, boy, am I glad for what I have on my calendar today or, boy, am I going to move the ball forward a little bit today or boy am I fortunate, you know, to have what I have in life. I think she is in that mode. She is pursuing a love, and I think Denise is going to succeed.
VELSHI (on camera): Time for one more cup of coffee before things close down for the day at the Walnut Creek Baking Company, although the owner, Denise Vickers, is going to need coffee to get her through the rest of the day after working hard for the last three days on her turnaround.
Well, Denise has come to terms with something she was kind of avoiding, the conversation with the bank about her line of credit. She's kind of figured out how to deal with that. She's also figured out who she is and what she wants her business to represent. Ironically, she started off with the logo of a cake and she's decided that she wants her business to be about cakes. She's thought about how to market it better, who to target and how to better make money and enjoy her life. Denise Vickers is going to work hard to keep the doors of this business open and make a success of it.
In Walnut Creek, California, I'm Ali Velshi. See you next time on THE TURNAROUND.
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