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Joe Fox, Former Owner of Community Bakery

Community Bakery owner, Joe Fox, is a well-educated man. He attended UA Little Rock for his undergraduate degree in Engineering Technology, then studied Economics at Stanford University and earned an MBA from Harvard. His time in Boston coupled with his love of business led to his weekly habit of reading the Sunday New York Times.

When he returned to Little Rock from Boston, he found there were no bagel and coffee shops that carried the Sunday edition of the Times. This inspired him to become a distributor and ultimately led to him buying Community Bakery.

The original Community bakery was started by Ralph Hinson in 1947 in Rose City North Little Rock. It changed hands in the late 1970s and was sold to Mr. Fox in 1986. In 1993, Fox relocated the bakery to its current location at 12^th and Main.

He employs 65 people. Recently Fox partnered with John Brandenberger, whom Fox is grooming to take over the business. In October, 2018, it was announced that Community Bakery would transition over to solar power. They have another location on Shackleford in West Little Rock.

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EPISODE 124

[INTRODUCTION]

[00:00:08] JM: Welcome to Up in Your Business with Kerry McCoy, a production of flagandbanner.com. Through storytelling and conversational interviews, this weekly radio show offers listeners firsthand insight into starting and running a business, the ups and downs of risk-taking and the commonalities of success people. Connect with Kerry through her candid, often funny and informative weekly blog where you’ll read and comment on life as wife, mother, daughter and entrepreneur.

Now, it’s time for Kerry McCoy to get all up in your business.

[INTERVIEW]

[00:00:42] KM: Thank you, Jayson. Like Jason said, I’m Kerry McCoy and it’s time for me to get up in your business. Before we start, I want to introduce my cohost who you just heard from, Jayson Malik, from Arise Studio in Conway, Arkansas. Say hello, Jayson.

[00:00:56] JM: Hello.

[00:00:57] KM: If right now you’re sitting at your computer, you might want to watch us live on flagandbanner.com’s Facebook page. It’s kind of fun to see what goes on behind the scenes. I just waved at everybody on Facebook, and at the breaks as it happens in real-time. If for some reason you miss any part of today’s show or you want to hear it again or you want to share it, there’s a way and Jayson will tell you how.

[00:01:22] JM: Listen to all UIYB past and present interviews by going to flagandbanner.com and clicking on Radio Show. Also by joining our e-mail list, or liking us on Facebook, you’ll get a reminder notification that day of the show with a sneak peak of that day’s guest. Back to you, Kerry.

[00:01:54] KM: If you’re tuning in to this broadcast for the first time, welcome, and if you’re a returning fan, you probably know this next part by heart, but we must acquiesce the script for our new comers and give my guest a chance to settle in to their seats. This show Up in Your Business with Kerry McCoy began as a platform for me, a small business owner and a guest, to pay forward our experiential knowledge in a conversational way. Originally, my team and I thought it would speak to entrepreneurs and want to be entrepreneurs, but it seems to have a wider audience appeal, because after all, who isn’t inspired by everyday people’s American made stories? To see people in their totality is humanizing.

We all thirst to connect and make since of an overcomplicated world, and on this show, we have the luxury of time to go deeper than a mere sound bite or a headline. My favorite part is we always learn something. It’s no secret that successful people work hard, but other common traits found in many of my guests are the heart of a teacher, belief in a higher power and creativity, because business in of itself is creative.

My guest today is probably the most educated restauranteur I’ve ever known, Mr. Joe Fox, owner of Community Bakery in Little Rock, Arkansas. Also has a degree in engineering technology, economics and an MBA from Harvard. Joe’s career story is not like any I’ve ever heard. From what I can tell, he did not have a burning desire to cook, serve or commune with others. His inspiration for starting his coffee shop was simply to create a place where he could sit and read the Sunday New York Times.

This creative and risky business venture to open an Upscale Coffee Shop on Main Street in Little Rock’s distressed downtown neighborhood has been hugely successful. So much so that Fox has since opened another Community Bakery in West Little Rock. He’s got lots of business ventures. We’re going to hear lots of them. He’s not just a restauranteur. It is a pleasure to welcome to the table the intelligent creative businessman and a restauranteur, Mr. Joe Fox.

[00:04:04] JF: Thank you, Kerry.

[00:04:07] KM: You went to school at UA Little Rock and got a degree in engineering technology. You went to Stanford University and studied economics. You went to Harvard and got an MBA master of business –

[00:04:21] JF: Administration.

[00:04:22] KM: Administration.

[00:04:23] JF: Yup.

[00:04:23] KM: Thank you, and now you own Community Bakery.

[00:04:27] JF: Yup.

[00:04:27] KM: And apartment buildings. Who is Joe Fox?

[00:04:35] JF: I’d have to think about that for a while before I could answer. I’m not sure. Anyway, I’m just somebody who likes to operate businesses, I guess, small businesses for the most part. I kind of got used to doing that type of activity when I was young and just kept on. In fact, there’s an irony to the fact that at this point in my life I’m selling donuts and newspapers and I did that when I was a kid.

[00:05:06] KM: You did. Where did you grew up in Missouri?

[00:05:08] JF: I grew up in St. Louis. Sold newspapers on the street corner. The day Kennedy was shot, I was out there selling the St. Louis Post-Dispatch, just a few doors, a block from my house and I remember calling out the way we used to hear in the TV shows at that time, I say they actually issued an extra addition that day. St. Louis Post-Dispatch was an afternoon newspaper and it had a two-star edition and three-star edition, but on the day that the assassination occurred, they put out an extra edition and sure enough it said extra up in the upper right hand corner of the newspaper and I was out there saying, “Extra! Extra! Read all about it! Kennedy assassinated in Dallas.”

Anyway, I was selling newspapers and I’m selling the New York Times and the Wall Street Journal still today. On the donut side, I guess when I was in high school I kind of made a bit of a name for myself selling donuts to raise money for our junior high school prom and my innovation that enabled us to sell so many more donuts than any previous class and raised so much more money for our prom was that we decided we could sell donuts on credit to our lower classmen, the other kids on the school. This was a six-year school, and it’s 7th graders through seniors. So there are six classes, and we sold donuts to everybody in the school. But if they didn’t have enough change in their pocket, they could sign a little slip that said, “I promise to pay the junior class of St. Louis prairie,” and there’s a blank they could fill in however much they wanted and buy as many donuts as the wanted and people took advantage of that and we sold a hell of a lot more donuts.

Of course, then we had to collect. So we sent the Burley football players around to collect as necessary, and there were some students who were awfully generous and they’d buy donuts for all their friends and they racked up some pretty big bills, and that helped us have a grand – What do you call it? A grand junior prom. In fact, we brought in an out of town music act and paid way too much money and probably wasn’t good use of money, but it’s what we did.

[00:07:36] KM: It sounds like a great story though.

[00:07:37] JF: Yeah, it was fun.

[00:07:39] KM: You are very entrepreneurial. Are your parents –

[00:07:41] JF: Go ahead.

[00:07:42] KM: Are your parents?

[00:07:43] JF: Well, my parents passed away, of course –

[00:07:46] KM: Were your parents?

[00:07:47] JF: No, they were not. My dad was a banker. My mother took care of us, 7 kids. So, yeah.

[00:07:54] KM: 7 kids.

[00:07:55] JF: Yeah. Anyway.

[00:07:56] KM: You’re from Missouri, and I guess they all live there.

[00:07:59] JF: Well, yeah. It’s a bit of a story as well. I first came to Arkansas when I was like 18 and I floated across the border on the Eleven Point River, but it turns out actually that my dad was born here in Little Rock. My mother was born in Jonesborough. My grandfather was born in Poplar Bluff, but I had never been to Arkansas and my siblings hadn’t really either.

[00:08:23] KM: What did you call that? The Eleven Point River?

[00:08:25] JF: Where did I what?

[00:08:26] KM: What did you call that?

[00:08:27] JF: Yeah, the Eleven Point River. It starts in the Missouri Ozarks, but it flows into Arkansas and it was one of – When I grew up in St. Louis, in the summers we would like to go to the Ozarks and take float trips to get away from the heat and have a nice weekend and all.

[00:08:49] KM: You were 18.

[00:08:50] JF: Yeah, that was –

[00:08:51] KM: But that’s not how you really got to Arkansas. Before the show started, you are kind of telling me how you got to Arkansas.

[00:08:58] JF: Yeah, okay. So, yeah. When I got out of business school, I wanted to do something other than work for corporate America, so I actually came to Little Rock to work for ACORN, and it was pretty much straight out of business school and I came down visited with Wade. Christmas, my second year of business school and read – Actually, I didn’t agree at that time to come back. I worked at some other corporate jobs and decided not to go that route and came here.

[00:09:27] KM: That’s Wade Rathke, who’s still manages ACORN, or is ACORN –

[00:09:32] JF: I guess ACORN National is not in existent by that name, but ACORN International is there and Wade is –

[00:09:38] KM: He’s very involved in the international.

[00:09:39] JF: He does run that and he’s still doing today what he was doing whatever how many years ago was that, 77, that’s 40 years ago.

[00:09:48] KM: I don’t people realize that the A in ACORN stands for Arkansas.

[00:09:52] JF: Yeah, it did originally.

[00:09:53] KM: It did.

[00:09:53] JF: Yeah, and then the A in ACORN originally was Arkansas Community Organizations Reform Now, and then when it expanded to other states, the A became – A was for Association of Community Organizations for Reform Now. So that’s –

[00:10:11] KM: You were part of something that was very important at the time. Did you feel like it?

[00:10:17] JF: Back in the day, a lot of us were trying to figure out how we can make a difference, how we can affect social change, and ACORN was probably the premier community organizing entity in the country. By the time I came to work for it, it was already more than 20 other states. So it has expanded way beyond Arkansas at that point in time.

Honestly, when I was in business school, I needed to kind of keep my perspective on the weekends. I’d read some Alternative Press and I remember reading about ACORN and thinking, “I need to check that organization out.” So I did.

[00:11:03] KM: I think a lot of people coming to high school and they don’t know what they’re going to be, and when I was reading your resume and bio, like I said, you went to school at the University of Arkansas, but you’re from Missouri. Then you went to –

[00:11:16] JF: I didn’t go to University of Arkansas till I was in my 40s and early 50s. That was a midlife endeavor. In fact, I like to say that from my midlife crisis, instead of getting a new wife or a new car, I got a new degree.

[00:11:34] KM: That’s probably a lot healthier, achiever. Even though it’s expensive, it’s still cheaper.

[00:11:37] JF: Yeah. In the long run, yes, that’s true.

[00:11:41] KM: Then you went to Stanford.

[00:11:42] JF: Yeah, that was where I went out of high school in Stanford.

[00:11:45] KM: Oh, you went to Stanford out of high school, and it was economics. Then you ended up going to Harvard for business, which isn’t too much of a stretch.

[00:11:53] JF: I mean, when I studied economics, I eventually have figured out that economics didn’t really help you understand how to run a business or how business is ran. There were supply and demand curves, but that wasn’t really – I knew that businesses didn’t really kind of make decisions that way. So I thought, “Well, I think I need to go off to business school to really kind of learn the guts of it.” So that’s where –

[00:12:21] KM: So you’re in Boston.

[00:12:22] JF: Yup.

[00:12:23] KM: And you get out of Harvard and you stay in Boston.

[00:12:25] JF: No, I came here.

[00:12:27] KM: You didn’t stay at all in Boston.

[00:12:28] JF: No. I came here straight out of business school. I piled everything I had into a van and drove to Arkansas.

[00:12:34] KM: To work for ACORN.

[00:12:35] JF: That’s right.

[00:12:36] KM: When you got here, was there a News York Times to read?

[00:12:40] JF: No. I got here in 77, but I was only here really for about 6 or 7 months, but I took a like in Little Rock and wanted to come back. So I eventually did, but that was 4, 5 years later. When I came back here in ’81, I’ve been here ever since, and it was at that time that I thought, “Well, I like to read the New York Times. I can’t get it here on the day of publication.” There was one newsstand down on Main Street that carried the Sunday New York Times, but it came in by bus and it got here on Wednesday or Thursday, three or four days after the date of publication. So I said, “We got to be able to do better than this.” So I dug into it and eventually figured out that the only way I could get it here on Sunday was to become a distributed. So that’s what I did.

[00:13:41] KM: So we have a New York Times in Little Rock now because of you.

[00:13:45] JF: Yeah. It would have gotten here eventually without me, but it got here in ’83 – No. ’82. ’82 because of me, yeah. Well, I had a lot of help with it too. My wife was certainly – I guess I have to tell this story.

So we started bringing the New York Times in by plane on Sunday the weekend before our wedding.

[00:14:14] KM: She’s going to kill you, I could tell.

[00:14:16] JF: What that meant was that on our wedding night, in the middle of the night, my wife, Lia, was up in her hotel room organizing the delivery routes and our friends agreed. Our friends then delivered the papers on the next morning. So I’m afraid I was sleeping and she was –

[00:14:37] KM: She’s rolling up papers and just making stacks.

[00:14:40] JF: Well, the papers weren’t there yet. She was just organizing the index cards and what order the routes were going to be delivered and divided them into routes. So it was all pretty new at that time, and we probably only had – I don’t know, 50 or 60 subscribers at that point.

[00:14:57] KM: How did you get your subscribers? Do you go out and selling door-to-door, putting ad on the paper? What did you do to know that you had an audience for it?

[00:15:04] JF: Okay. So when I got this idea that I would have to – The only way I could get it here was to be a distributed, is started trying to figure out how am I going to get enough subscribers to persuade the New York Times to ship them here for us, because they paid the bill for the plane. We didn’t. But they had all the logistics arranged and everything like that, because they were already doing that in various other areas. We originally got our papers shipped flown out of Chicago, and that went on for years. Well, a couple of years.

Anyway, long and short of it, I started asking all my friends, “Who do you know that might be interested in reading the New York Times?” and they would give me names. I’d get on the phone and call those names and I’d ask everybody that I spoke to if they had any other names they could recommend and buy that kind of phone tree, going from one caller to the next, one potential subscriber to the next. We got up to – I don’t know how many the first week or two, maybe, as I say, 50 or 60, but we eventually got up to a couple of hundred, but that’s how we got started.

[00:16:11] KM: How many do you distribute today?

[00:16:14] JF: Well, today, Sunday New York Times we probably distribute about 700 to 800, but that’s not just subscribers. We take them to all the Starbucks. We take them to other dealers and whatever. Truth to the matter is that – So I started that in ’82. In the mid-90s, the New York Times decided that it was ready to add Little Rock to its kind of national distribution, even though of course we were already distributing here and we were one of their contract, one of their distributors, but they didn’t think they actually had distribution here. But they added it to their national distribution, and we contracted with them to delivery all those papers.

So of those 700, let’s see, I would guess maybe 600, 500 to 600 are subscription copies, but only a hundred of those actually subscribe directly through us. The other 400 or 500 subscribe through the New York Times, but we deliver them all.

[00:17:16] KM: I’m going to say, but you probably deliver them all.

[00:17:18] JF: We deliver them all. They’re all integrated into one.

[00:17:20] KM: It doesn’t sound like a lot of money maker. That sounds more like a labor of love.

[00:17:23] JF: Yeah. Well, it was a little bit of that, and you asked on how did we expand the subscription rolls. One of the things that I recalled doing was – So in that first year or two, I’d go out jogging regularly and I remember three or four times a week. But I just pick a neighborhood that I thought might have enough prospects for more New York Times subscribers and I’d just leave fliers on their front doorstep, but I’d try to get out there early enough that their Arkansas Gazette at that time, or yeah, at that time it would have been the Arkansas Gazette in the morning. That their Arkansas Gazette was still there and I just slide the flier underneath their Arkansas Gazette, so when they picked up their paper in the morning they’d see that they could also subscribe to the New York Times if they wished.

[00:18:13] KM: That’s target marketing right there. If they’ve gotten this paper, they like newspapers. Smart.

All right, this is a great place to take a break. When we come back, we’ll continue our conversation with Joe Fox, owner of Community Bakery in Little Rock, Arkansas. We’ll hear the story of how he came to own the coffee shop and get some management tips on how he has made it hugely successful. Learn about his newly installed solar panels that power his ovens, and lastly about passing the baton. He has recently taken on a business partner and has begun to plan for his retirement. We’ll be back after the break.

[BREAK]

[00:18:50] JM: You’re listening to Up In Your Business with Kerry McCoy, a production of flagandbanner.com. Over 40 years ago with only $400, Kerry McCoy founded Arkansas Flag and Banner. During the last four decades, the business has grown and changed, starting with door-to-door sales, then telemarketing, to mail order and catalog sales, and now a third of their sales come through the internet. This past year, Flag and Banner added another internet feature, live chatting.

Over time, Kerry’s business and leadership knowledge grew. As early as 2004, she began sharing this knowledge in her weekly blog. In 2009, she founded the nonprofit Friends of Dreamland Ballroom, and in 2014, Brave Magazine. Today, she has branched out unto the radio with this very production, podcast and live stream on Facebook.

Each week on this show, you'll hear candid conversations between her and her guests about real-world experiences on a variety of businesses and topics that we hope you'll find interesting and inspiring. If you like to ask Kerry a question, or share your story, send her an e-mail to questions@upinyourbusiness.org. That's questions@upinyourbusiness.org, or send her a message on flagandbanner.com’s Facebook page.

Back to you, Kerry.

[INTERVIEW CONTINUED]

[00:20:17] KM: You’re listening to Up in Your Busines with me, Kerry McCoy, and I’m speaking today with Mr. Joe Fox, owner of Community Bakery in Little Rock, Arkansas. Before the break we talked about how Joe, a Missourian. I think that’s the way you say it, came to live in Little Rock, Arkansas by following ACORN that he was – I think of you as a hippie trying to save the world. That was kind of that era. What would you call us back then?

[00:20:42] JF: We had those aspirations.

[00:20:44] KM: We did have those aspirations. It’s driving my mother nuts if I didn’t shave my legs. I remember that. I wouldn’t do that today for anything, but back then we did. Then we talked about how you went to Harvard, how he was born an entrepreneur and sold donuts for junior high prom. Some people are just born and cannot stop creating businesses. Something before the break that you said that I really relate to is you love creating small businesses. I just almost have to sit on my hands to not go bankrupt, because I want to start new businesses all the time. I see opportunities, I want to start them, and I have to remind myself. I don’t have enough time and energy to do all that.

So we’re going to talk about you living in Boston, going to school at Harvard. You began a weekly habit of reading the Sunday New York Times, and when you came to Little Rock in 1985, ’84 –

[00:21:38] JF: I came here to stay at ’81.

[00:21:40] KM: ’81, that you had no bagels and coffee shops and nobody carried the Sunday edition of the Times, and that this inspired you to become a distributor and ultimately led to you buying the Community Bakery. So where do you want to start?

[00:21:54] JF: Oh my!

[00:21:55] KM: Let’s talk about the original Community Bakery. It was in Rose City. You didn’t start it from scratch. You bought it.

[00:22:00] JF: That’s correct. Yeah. Community Bakery started in Rose City in 1947 as best I can research at the Arkansas Study Center, whatever, and it was there for about 5 years. It moved to Main Street here on South Main here in Little Rock in 1952, and it was the year I was born by the way. So anyway, it was Ralph Hinson who started it. I’m told now with a partner, but I guess he bought his partner out very early. By the time it got to Little Rock, it was Ralph by himself. He put in the building on 1318 Main. I remember that address quite well, of course, but that’s where Raduno’s Pizza is today.

So when I bought the business, that’s where it was, and I operated it there for 10 years as a tenant, and then bought the property down the street a block away and redeveloped that property and moved it down there in 1993. So I bought it in ’83. Moved there in ’93, and it was at that point that it became a bakery café and dessert coffee house, which was really what my original aspiration was. But –

[00:23:24] KM: How did you first decide that that was the one? How did that coming to buy that coffee shop come to pass?

[00:23:29] JF: Well, it wasn’t a coffee shop when I bought it. It was just a –

[00:23:32] KM: Dinner.

[00:23:33] JF: It wasn’t even that. It was just a hole in the wall retail bakery. If you went into the customer area, it was no bigger than this room we’re in right now honestly, and it had three or four or five display cases and that was it.

[00:23:47] KM: You’re like, “I think I’ll buy this.” No. What happened?

[00:23:49] JF: No, I didn’t do that. So what happened was I actually – When I came to Little Rock, I wanted to look for a business to buy or startup or join in as a partner, and I was kind of predisposed towards something in manufacturing, or fabricating. That was just kind of my interest, and I had made an offer on a small fabricating business I thought I’d like to operate. But while I was waiting for kind of a reply on my offer, I went down and went to Community Bakery and asked to speak to the owner and asked if we could rent the facilities afterhours to bake desserts for our coffee houses some friends wanted to start. The one with New York Times and the bagels. She told me her name was Agnes Bargiel. She was the second owner of the bakery. Ralph Hinson, she was – Ralph Hinson, the original person who started Community Bakery, she was Ralph Hinson’s head decorator, and he sold it to her in mid the 70s, ’76, ’77, thereabout. So here I am in ’83, and I go in and talk to her and she told me, “Well, there was really any afterhours when they weren’t there.” I thought that was just to put off, but she – I learned later she was telling the truth.

[00:25:14] KM: They were baking back there, yeah.

[00:25:15] JF: Well, not just baking. That’s a story in itself. I might get to that in a second. Anyway, she said, “What do you want to do?” I told her we just – How we want to bake desserts, because we had a spot in mind in where we want to do this coffee house, but the fire regs wouldn’t let any cooking happen on premises. So we needed an offsite place to bake. She said, “Well, that won’t really work, but why don’t you just buy the bakery from me?” I said, “Well, I didn’t really have that in mind, but I didn’t say no,” and I went away and when the other deal didn’t work out, I came back and Agnus and I worked out something and I ended up buying it, and persuading her to stay on because she – I didn’t know a whole lot about the bakery business. I certainly didn’t know anything about decorating cakes. She was, as I say, Ralph Hinson’s head decorator and she was an expert at that.

I venture to say, she was the best in Central Arkansas at that time. In any event, she wouldn’t commit to stay in for more than a few months. I think she stayed six months, because it took me that long to pay her off the balance of what I owed her. That was part of our original deal. But then she eventually stayed with me 25 years and she worked at the bakery until she was in her 80s and I’ve never seen anybody with more stamina than Agnes.

Anyway, that was a big of a story. Well, I’ll just make one reference to Agnes and her stamina. Although if any of her relatives are listening, they probably shoot me for telling this story.

[00:26:58] KM: Oh, good. That’s my favorite kind of story.

[00:27:01] JF: Agnes would – When I bought the bakery, it was a pretty thin operation. There were only seven employees, and three of them were bakers. Two of them were decorators, and two of them worked the front counter. One in the morning, one in the afternoon. That was it. Anyway, Agnes – The second decorator was her daughter, but Agnes on the weekends was so busy decorating cakes that she would on Friday night, she might work way after closing. The bakery closes 6:00 in the evening at that time, but she’d work until 10 o’clock. Then she’d go – She had a cot in the business in a closet under her stairwell.

[00:27:43] KM: I was afraid you were going to say that.

[00:27:44] JF: She’d go in there and she’d get 4 or 5 or a couple of hours of sleep before she would then let her bakers in at 2:30 in the morning to come in and start baking cake all over again. So she really was there around the clock sometimes.

[00:27:57] KM: That’s a different kind of mentality than we have today.

[00:28:00] JF: As I said, she had more stamina. She had more commitment. She’s the hardest working person I’ve ever run into.

[00:28:06] KM: Well, it is an – I don’t think some people realize how lucky we are that we can work anywhere, anytime we want to, because people are like, “Oh! I’ve got to work,” and so like really you should be like, “Oh, boy! I’m so glad I live in a county where I can work at any job I want to work at.

My aunt lived under the stairs in my grandmother’s house. She was a school teacher. I don’t think that was – She’s probably from the depression era.

[00:28:35] JF: Yeah –

[00:28:37] KM: That’s a great story.

[00:28:37] JF: That’s a committed teacher though.

[00:28:39] KM: Just like Harry Potter.

[00:28:41] JF: Yeah.

[00:28:42] KM: So she –

[00:28:43] JF: Anyway, you wanted to ask I guess what I – So I bought the bakery and it was just, as I say, a 7-person operation and we –

[00:28:55] KM: Were you thinking, “Have I lost my mind?”

[00:28:57] JF: Well, I did ask myself that question.

[00:29:01] KM: Are we getting a phone call? Oh! Someone’s trying to phone in to ask – I haven’t given them your phone number yet. We’ll do that at the break though. I think someone is maybe going to ask you a question.

So what are the terms of the sell when you sold that back then? I guess you just paid cash out? You said it took six months to pay her out?

[00:29:16] JF: Well, I paid 80% in cash upfront and the other 20% I paid her out over six months. But really that was just an effort to ensure she stick with me for a little bit.

[00:29:27] KM: And that’s a point I wanted – And that’s something I wanted to point out, that it’s probably always good if you’re going to buy a business to pay half of it, let’s say, upfront, and then the other half over terms over the next couple of years. It creates tax deferred. It becomes an expense instead of an asset on your balance sheet. Also, it ensures that they stay.

[00:29:53] JF: I think that’s probably true. In fact, that may happen to me when I try to pass Community Bakery on to my successor.

[00:30:00] KM: I hear you’re going to do that. All right, I could talk to him forever. Let me see what time – So we’re going to – You were downtown. We need to move into – I want to let our people that kind of want to know what it’s like to run a business. Is there anything that you would say about your coffee shop if somebody’s wanting to go out and maybe start one? When you did it, there wasn’t a lot of competition. Is the competition today affecting what you do and would you start one today?

[00:30:32] JF: Oh, that’s a good question actually. The competition has always affected us, but it’s of course gotten more and more intense over the years. I’m not sure I’d be brave enough to start a coffee shop these days, but there are a number of people out there who’ve done it just in the last year or two. We got three or four new ones downtown. So I give them a lot of credit for stepping out and doing that.

[00:30:59] KM: Do you think you’d buy a franchise?

[00:31:01] JF: I wouldn’t. That’s just –

[00:31:04] KM: Why not?

[00:31:04] JF: I’m too much of a kind of want to do things my way. That was one of the beauties of having my business, was that I could decide I wanted to do something I could implement it the next day, and that was one of the – That’s something that’s the most fun about owning your business.

[00:31:22] KM: I think so too.

[00:31:23] JF: You can come up with creative policies, procedures, methods, marketing. You name it. You can implement it as soon as you can put the time and energy into it, and I’ve always loved that about the bakery. Of course, I came with a lot of ideas. So I designed a lot of systems that were way too complicated and way more extensive that need be for the size operation I had. But that’s just who I was. My wife will constantly tell you that I –

[00:32:01] KM: Dumb it down.

[00:32:01] JF: That I do things.

[00:32:02] KM: You needed to simplify.

[00:32:03] JF: I make things way too complicated. Yeah, just simplify. Yeah.

[00:32:06] KM: I think we all did that when we were young entrepreneurs though. I think we all wanted to do things harder.

[00:32:11] JF: Best example of that in the bakery is just the breadth of our product line. We do so much. We make so much different stuff, and that creates a very challenging production environment, but at the same time it also buys us a little insurance in the competitive marketplace, because in the years when all these new operations would come up, let’s say, at one point it was new bagel shops, new cupcake shops, new cake shops, decorating and enterprises, whatever, they all would kind of take a bite out of our pie, but they didn’t put us out of business.

[00:32:58] KM: Because you’re so diverse, breakfast, lunch, dinner, to-go, everything.

[00:33:01] JF: Right. As I say, the challenge with that though is on the production side of things, because we produce hundred different products a day and just trying to produce an appropriate quantity and maintaining the quality and –

[00:33:17] KM: Yeah, and is perishable.

[00:33:19] JF: That’s exactly right.

[00:33:20] KM: I want to talk about that in the next segment. It’s time to take a quick break. When we come back, we’ll continue our conversation with Joe Fox, owner of Community Bakery in Little Rock, Arkansas. We’ll get more management tips from this MBA graduate from Harvard. Learn why and how to decide – How he decided to install solar panels to power his ovens. Lastly, about passing the baton. He has recently taken on a business partner. I want to hear about that, and I want to hear how he plans for his retirement. We’ll be back right after the break.

[BREAK]

[00:33:51] JF: Flag and Banner is proud to underwrite Up In your Business with Kerry McCoy, where listeners are offered firsthand insight into the humanity and commonalities of successful people shared in a conversational interview with Kerry.

Along with this radio show, flagandbanner.com publishes a free bi-annual magazine called Brave. First published in October 2014, Brave Magazine harnesses the power of storytelling and human empowerment. The Department of Arkansas Heritage recognize Brave magazine’s documentation of American life and micro-fishes all editions for the Arkansas State Archives. Subscribe to this free periodical by going to flagandbanner.com and selecting Magazine.

Back to you, Kerry.

[INTERVIEW CONTINUED]

[00:34:37] KM: You’re listening to Up in Your Business with me, Kerry McCoy, and I’m speaking today with Mr. Joe Fox, owner of Community Bakery in Little Rock, Arkansas, and we’re having a great discussion. We’ve talked about how he got to Little Rock. He’s a Missourian. We’ve talked about he started his business, and now we want to talk about the nuts and bolts of running Community Bakery. He has 65 employees. They’re open 7 days a week. How many hours a day?

[00:35:00] JF: Ooh! We’re open from – What is that? 6 AM to 8 PM. So that’s 14 hours a day most day.

[00:35:06] KM: 14 hours a day.

[00:35:07] JF: An hour later on Friday and Saturday till 9 PM.

[00:35:10] KM: Yeah. And you have perishable products. So in today’s world with low profit margins, don’t you feel like we have low profit margins today?

[00:35:19] JF: Absolutely.

[00:35:20] KM: Yes.

[00:35:22] JF: The bakery business has been a very low profit margin enterprise from the very start, and for that reason we’ve had to depend on big volumes. So our business model doesn’t work with moderate volume. We have to have a large volume of product through there because –

[00:35:37] KM: And that’s why you have to be open all the time.

[00:35:39] JF: Well, that’s part of it I guess. Yes.

[00:35:41] KM: Because you have perishable – Well, I was thinking about that. I thought, “Well, if I had perishables, I would not want to have a day off where they sat around.”

[00:35:47] JF: That’s a good point, yeah. It’s been so long since I wasn’t open 7 days a week and I’ve forgotten that.

[00:35:54] KM: You forgot why you did that. I think about that with some of the small grocery stores that are open six days a week. I think, “Golly! They must lose a lot of inventory on that day,” and everybody wants something all the time. So you really have to be open all the time.

[00:36:10] JF: I was reminded of that perishable cookies. We have a lot of product as one-day shelf life, all our break stuff. I mean, we have to sell it for reduced price, day old the next day if we sold it all. Some we just have to discard, we give to the stewpot or we give it to one of the other – Feed the homeless endeavors.

Anyway, over Christmas, we shutdown for a few days for some repairs, and whenever we do that, we basically have to clear the shelves, and that is a big deal, because it’s almost impossible to

[inaudible 00:36:45].

[00:36:46] KM: Do you know how much inventory you have on the shelf at any one time dollar-wise?

[00:36:50] JF: I don’t –

[00:36:51] KM: You don’t want to know.

[00:36:52] JF: Yeah.

[00:36:54] KM: Do you work all day? Are your bakers there all the time? What time do they start in the morning?

[00:36:59] JF: Well, they come in and stagger shifts. The first one is coming around 7 or 8 in the evening and the last ones come in at – Well, supposed to come in at 4 or 5 in the morning. Some wouldn’t get there until 9 or 10 in the morning. But be that as it may, there’s somebody baking probably from 7 or 8 PM until 3 or 4 PM. 7 or 8 PM one day till 3 or 4 PM the following day. So there’re only a few hours when there isn’t someone actually in the baking department.

[00:37:27] KM: To get your mind around that, it’s dinner time. It’s cocktail hour and dinner time. Everybody goes home. But all night long, there’s somebody in the kitchen baking.

[00:37:37] JF: Yes.

[00:37:37] KM: And you have apartments outback. So you’re a landlord too.

[00:37:40] JF: That’s true. We only have two apartments in there. They’re on the third floor of our back –

[00:37:45] KM: Are they your baker’s apartments?

[00:37:46] JF: They are not, although one of our staff recently looked at one of the vacant apartments and said she’d love to move in there. She could persuade her fiancé, but not quite yet.

[00:37:56] KM: That’d be a good idea. Do you watch your food cost every day? You’re an MBA guy. How often do you look at your financials?

[00:38:07] JF: Well, I have a weekly sheet that tells me almost everything I need to know.

[00:38:16] KM: A custom report.

[00:38:16] JF: And it has to do sales revenue and payroll cost. Payroll cost are by far our biggest cost. They amount to about 52 cents of every dollar. That’s incredibly labor-intensive. Then the ingredients cost are another 20% to 23% of our cost. You add those two together, you’re up at 75%. That only leaves the other 25% to pay all of your other – I mean, I’m talking about packaging, utilities, and then leave a few percentage points for your profit.

[00:38:50] KM: For the owner.

[00:38:51] JF: Yeah. Well, yeah.

[00:38:53] KM: Or to put in the bank for the slow seasons.

[00:38:54] JF: We could talk about that too. I mean, I know I get referred to as the owner and I am the principal owner, but I use that term because I actually only own about 90% of the stock. The other 10% is owned by about 15 or 20 other employees. That was one of my aspirations – When I first got into business, I wanted to do it to create jobs. That was one of my aspirations. The other one was to create employee ownership, employee partnership. That was something that I actually dug into when I was at business school and it was something that after my couple of years working for ACORN, I went back to Boston and worked for an organization for a couple of years. That was – Provided technical assistants to employee-owned enterprises. So that’s what I wanted to do.

[00:39:45] KM: Is it an ESOP?

[00:39:47] JF: No, it was not, and it had a model that was a little different from ESOPs. I looked at ESOPs as scams in some regard, but that’s a different deal.

[00:39:58] KM: You don’t like them. What does ESOP stand for? Employee –

[00:40:01] JF: Stock ownership plan.

[00:40:02] KM: There you go. Thank you.

[00:40:03] JF: Well, the employee ownership model that the organization that I worked with looked after was one modeled on the Mondragon Cooperatives in the Bask area of Spain, which are pretty remarkable.

[00:40:19] KM: Whatever that means.

[00:40:21] JF: Well, anyway. Northern Spain, but they have a pretty robust cooperatively employee-owned enterprise part of their economy.

[00:40:31] KM: Has it been successful?

[00:40:33] JF: It has and it’s been around for decades. Anyway – And I thought of doing that with Community Bakery and started off that way, but –

[00:40:45] KM: It was not sustainable?

[00:40:47] JF: Well, a lot of things. Number one, as soon as I got into Community Bakery, it took almost no time for me to just become overwhelmed with the day-to-day operation. That’s where all my attention had to go. So my kind of loftier goals or aspirations to create employee ownership that they didn’t quite – I didn’t have the capacity to really focus on that. You really can’t do it with one person anyway. You need more support than that. But I did.

[inaudible 00:41:15] to me eventually several years later starting to issue stock bonuses to my key employees who had been around for a while, made a commitment. It didn’t mean they were – When I say key, it didn’t necessarily mean they were managers. Although of course a number of them were, but they played a key role in the organization and it demonstrated a commitment, then I gave them a stock bonus and that’s how I got up to 15. We actually had I think as many as 22 employee owners a few years ago. It’s come down from that a little bit.

[00:41:52] KM: Because they sell it back? They sell back their stock and you buy it back?

[00:41:55] JF: Well, yeah. So the way we had it organized, so I’d give them a stock bonus and then I would say, “Listen, I’ve given you this. This is just a bonus,” and we’d run it through payroll. It was on their check like a bonus and I say, “But you also can buy the equivalent number of shares as I’ve given you a bonus.” But practically no one ever took me up on that. Only a couple of folks did.

[00:42:24] KM: I got you.

[00:42:26] JF: Yeah, when we gave them a bonus, they’d have to sign an agreement that says that if they leave the employment of the bakery for any reason, then they have to sell it back to the company. So that’s what happened. Whenever someone would quit or otherwise terminate, then we’d buy the stock back from them. That’s when they would actually see the monetary value of the stock.

[00:42:54] KM: Which is almost nothing.

[00:42:55] JF: Well, I shouldn’t say that’s not completely right. Throughout the time that they own a stock, they would get quarterly distributions of earnings, their per lot a share of earnings. At least once we got to the point where we were basically distributing whatever profit we earn when we weren’t really investing anymore.

[00:43:13] KM: Since you said 52% of your dollar is spent on labor cost, 50% of your company is in labor, you had 65 employees and I’ve noticed, and I’ve began to do this because I heard you’re doing this. I learned this from you. You probably don’t know that, about the enterprise zone where you get tax credits.

Tell our listeners what enterprise zone is and how you get tax credits, because this is good news.

[00:43:38] JF: Well, yes and no. So it’s empowerment zone.

[00:43:41] KM: I’m sorry. Empowerment zone.

[00:43:41] JF: No problem. You said that earlier. But in any event, so the

[inaudible 00:43:46] County was designated as an empowerment zone back in I think want to say 2001. It’s been that long. It’s been quite a while. But in any event, the empowerment zone legislation has expired.

[00:43:59] KM: It has?

[00:44:00] JF: Yeah.

[00:44:00] KM: No. I’m still taking tax benefits from it.

[00:44:03] JF: Well, you did last year, right?

[00:44:05] KM: Unless she told me to send it over this year. Maybe – Well, she doesn’t know I guess. We’ll find out.

[00:44:10] JF: She may know. Have her tell me.

[00:44:13] KM: So it expired like this year?

[00:44:15] JF: Well, it’s expired multiple times, but each time it’s expired, it’s been extended. Now, last year it expired at the end of – What was that? 2016, and then it did not exist for 2017. But back in February in 2018, as part of the deal to reopen the government in February of last year, part of the legislation extended the empowerment zone through 2017, which had already closed two months earlier. But that’s why we all got to claim empowerment zone credit for 2017. I’m hoping the same thing will happen this time around.

[00:45:00] KM: I am too. So what it is, is empowerment zone means that if you hire somebody that lives within the empowerment zone that’s specified that the government will give you a tax benefit for their salary.

[00:45:16] JF: Yes. There are variety of things that – There are variety of things that the empowerment zone put into place, but one of them is the employment credits, and that’s what you’re referring to, and that’s all I’ve made use of. Yes, the rule there is that if you have an employee who – First of all, if you operate your business in the empowerment zone and it’s not all of

[inaudible 00:45:39] County. It’s very narrow.

If your business is in the empowerment zone and your employee lives in the empowerment zone, those two criteria, and as long as they meet some other criteria, they got to work for you for a minimum of three months and they can’t be a relative. Yeah, they can’t be a family member and a few other exclusives.

Be that as it may, if they meet those criteria, then you can claim an employment credit and that’s –

[00:46:06] KM: And it adds up.

[00:46:08] JF: It adds up. It’s very significant.

[00:46:10] KM: If you get 65 employees like you do, that can make a big difference.

[00:46:14] JF: It did. It has made a big difference. In the early years when we did it, I kind of saw it as just kind of a windfall and we actually gave out extra bonuses to our employees, which we called easy bonuses.

[00:46:30] KM: Oh! Easy bonuses.

[00:46:31] JF: We did that for a number of years, but then when cost caught up with us on other fronts, those easy bonuses kind of just segued into just regular bonuses and we –

[00:46:44] KM: Well, I wanted to talk about training, because when I come to your place, there’s a lot of people in the front counter that are new and I wonder how you handle the turnover and the training. I’m sure in the back, the bakers are more stable, but it seems like the front counter has a lot of turnover. I wanted to talk about training, but we’re running out of time and I really want to talk about the solar panels.

Everybody is interested in solar panels. I’ve got prices on solar panels. How did you come to decide – Before you answer this, let me jump in here and just tell everybody that I’m talking – That they’re listening to Up in Your Business with me, Kerry McCoy and that I’m speaking today with Mr. Joe Fox, owner of the Upscale Coffee Shop and you might say the first Community Baker – The first up-scaled coffee shop really and Community Bakery in downtown Little Rock.

So let’s decide on how you decided to do solar panels. You’re an engineer by trade, technology engineer. So I know you did your due diligence on this.

[00:47:39] JF: Okay. So first of all, I’ve had a long interest in solar energy. Before I even bought the bakery, actually I was interested in solar energy. When I first came to Little Rock when I was looking around for things to do, I actually worked with a guy –

[00:47:50] KM: In the 80s?

[00:47:51] JF: In the early 80s, ’81, ’82, I worked with a guy named Bill

[inaudible 00:47:54], who’s kind of the grandfather of solar in Arkansas, and I’m kind of aspired to do something in solar for the longest time. But as I say, the day-to-day demands of operating the enterprises I was already in, I couldn’t very well do that. To be honest, I probably – We did this solar project just a few months ago. Honestly, I wouldn’t have been able to do it if I brought on a new partner who’s really taken a lot of the responsibility off my shoulders for operating the day-to-day operation of the bakery. If he hadn’t been there, I wouldn’t have kind of jumped at this opportunity that came up to do it when I did it.

[00:48:35] KM: What opportunity was it?

[00:48:37] JF: Oh! A neighbor put me in touch with somebody who I’ve done solar for her in her house and she just happened to send the inquiry at the right time. I was out of town and got the email and I was relaxed and I said, “Yeah, sure. Have those solar. People call me.” They called me and they came and met with me the next week.

Again, as I say, if John Brandenburg, my new partners, had not been really much running the day-to-day operation with our general manager, I would have just said, “I’m sorry, I don’t have time. I don’t have time.” I’ve said that to so many opportunities so many times just as you referred to earlier. When you get into business, you just start seeing opportunities wherever you look, and just have to decide what you’re going to do. But in this particular instance, I guess the stars were aligned and I said, “Yeah, let’s talk about solar.” Honestly, I just put the deal together. They came and made me a proposal and I didn’t even go out and get an alternative bid.

[00:49:38] KM: Oh! I can’t believe that.

[00:49:39] JF: I just said, “I’m going to do it.”

[00:49:41] KM: Okay, good.

[00:49:42] JF: Because I had actually been – The last several years, I’d been intending to do solar where you could install it somewhere remote and put a meter in your Community Bakery name there and then you could aggregate meter it with your Community Bakery meter downtown. That was what I was going to do. So I kept looking around for lots in the neighborhood that I could just buy and maybe put solar on. I finally figured out this is the only way I was going to do it.

[00:50:11] KM: I don’t think people realize that. You can put solar panels in a field in the country as long as that field is in the Entergy that has our – Yeah, Entergy’s service area. So you could put them anywhere. Then the –

[00:50:32] JF: As long as you put the meter at that location in the same name as the one for your business or that you want to aggregate it with, then you can do that.

[00:50:42] KM: They’ll let you use it. So you collect the energy out there in Scott, Arkansas, let’s say.

[00:50:45] JF: Yeah. It goes on the grid.

[00:50:46] KM: Goes on the grid, goes downtown to Entergy. Entergy will send it out to Community Bakery and you will get to use it. You could even send it to your home, couldn’t you?

[00:50:55] JF: Yeah. Whatever you want to aggregate – Whichever meters you want to aggregate, you can do that.

[00:51:00] KM: I didn’t realized that. Now you can’t go out of Entergy service area. You can’t go to Louisiana and be on a different company. I did not realize that.

[00:51:09] JF: Yeah, that sounds right.

[00:51:10] KM: And they actually put a meter in and one meter is running at the power that you’re using and one meter is running backwards. That’s the one you’re collecting from solar. Isn’t that interesting?

[00:51:20] JF: That’s what they say. Now, actually, these new meters don’t actually run backwards. They have –

[00:51:24] KM: You’ve ruined it for me.

[00:51:26] JF: But that’s the old ones did, but they have a separate read out for what you’ve put back on the grid.

[00:51:30] KM: And you don’t get to collect it and save it for month-to-month like some people think.

[00:51:34] JF: Nope. First of all –

[00:51:36] KM: So don’t over put it – Don’t put in too many panels.

[00:51:40] JF: We don’t have any problem with that. We consume so much energy at Community Baker that our solar panels – We have 102 solar panels on our –

[00:51:48] KM: Where are they? Are they on the roof?

[00:51:50] JF: They’re on the roof of that main building that people come in and sit down and have their coffee. You can barely see the edge of them and actually that’s by design partly because we buy, installing them on a historic building and you’ll be interested in this, because you have an historic building, but more historic than ours. In fact, but in any event, we were able to claim a historic rehab credit for the cost of that solar installation, and that was another reason that made it very attractive to do it and persuaded me to say, “Let’s just get this done and I don’t have time to spend a lot of energy on trying to look at other alternatives.” I trusted the people Seal Solar are the ones who did –

[00:52:41] KM: Seal Solar.

[00:52:42] JF: Seal Solar. They did our project. They did a very nice job. They’re good people to work with.

[00:52:46] KM: How long will it take you to recoupe the money you spent? So let’s say you spent $10,000 putting them on the roof. How long will it be before you can actually recoupe the $10,000?

[00:52:55] JF: So the payback for our project is in a little over six years, but it should be producing energy for well beyond that.

[00:53:07] KM: So if you were to finance it, let’s say, and so let’s say refinancing it at $2,000 a month. Instead of paying your Entergy bill, you would be paying along for $2,000 a month. Is that true?

[00:53:20] JF: Pay cash upfront.

[00:53:22] KM: It seems like that would be true. You could just swap your utility bill for a loan and then of years, you would actually have no utility bill and no loan.

[00:53:33] JF: That’s probably not quite that simple.

[00:53:36] KM: I bet it is.

[00:53:37] JM: That would be nice.

[00:53:38] KM: So let’s talk about tax credits. Do you get tax credits back for it?

[00:53:42] JF: For the solar, yeah. There are some big benefits there. So the historic rehab credit was significant. That’s 25%. There’s a federal solar energy credit, that’s 30%. Add those two together, it’s 55% right off the frontend, okay?

[00:54:00] KM: I’m loving that.

[00:54:01] JF: But then also because this is income-producing property, that we can depreciate the investment. So that of course reduces our tax bill and there’s some cash flow associated with that.

[00:54:16] KM: I love it.

[00:54:16] JF: Of course, as that increases our taxable income, there’s additional income tax that we have to pay there. Factor all that into the projections, that’s the type of thing I enjoy.

[00:54:27] KM: That’s what you love.

[00:54:27] JF: Tinkering with. I mean, what I determined was the Seal Solar folks first came to me and told me that it was like a 16% internal rate of return. When I did my own calculations, I determined it was more like 12%.

[00:54:46] KM: That’s difficult.

[00:54:46] JF: That’s like 30 years out. Since I’m not sure I’m going to be here 30 years from now, I thought I ought to look at what it’s going to be 10 years from now, or 20 years. So even after 10 years, there’s like a 6% internal rate of return. I said, “Well, that’s better than I can do with cash in the bank. So I’ll take it.”

[00:55:04] KM: We didn’t get to talk about your passing the baton. You’ll have to come back and tell me about that, maybe after you – Because you said you’re going to start talking about retirement. But I do have a gift for you. Thank you so much. Look here, it’s a desk set with flags.

[00:55:16] JF: Look at those flags. That’s fabulous.

[00:55:17] KM: Now, that’s U.S. You recognize it.

[00:55:18] JF: I recognize. Of course, that’s Arkansas and this one is –

[00:55:24] KM: One of them is Boston and one of them is Missouri.

[00:55:25] JF: Oh! Is that right?

[00:55:27] KM: Or Massachusetts.

[00:55:28] JF: Okay. I was going to say –

[00:55:28] KM: Massachusetts. Not Boston.

[00:55:31] JF: I’ll recognize Missouri. Okay, all right.

[00:55:32] KM: Ain’t that good?

[00:55:33] JF: Well, fabulous, Kerry. Thank you so much. That was awfully thoughtful of you to put that together. Thanks so much.

[00:55:38] KM: You’re welcome. I hope you enjoy it. We’re going to have – Who’s our guest next week?

[00:55:44] JM: Cristina Littlejohn, executive director of Arkansas Symphony Orchestra.

[00:55:48] KM: Yeah. She has turned that thing around. She’s going to be really interesting. Joe Fox, thanks again. Jayson, will you tell our listeners how they can be a part of the show?

[00:55:57] JM: If you have a great entrepreneurial story and would like to share with Kerry, you could send a brief bio to questions@upyourbusiness.org, a message on flagandbanners.com Facebook, or make a comment on her blog.

[00:56:11] KM: That’s right. I’m everywhere. I’m easy to get in touch with. Just Google my name up. I think I’m on the second page of Google.

Lastly, to our listeners, thank you for spending time with us. If you think this program has been about you, you’re right, but it’s also been for us. Thank you for letting us fulfill our destiny. Our hope today is that you’ve heard or learned something that’s been inspiring or enlightening, and I definitely have, and that it, whatever it is, will help you up your business, your independence or your life.

I’m Kerry McCoy and I’ll see you next time on Up in Your Business. Until then, be brave and keep it up.

[00:56:43] JF: Thank you, Kerry.

[00:56:44] KM: You’re welcome.

[END OF INTERVIEW]

[00:56:48] JM: You've been listening to up in your business with Kerry McCoy, a production of flagandbanner.com. If you miss any part of this show or want to learn more about UIYB, go to flagandbanner.com and click on Radio Show, like us on Facebook, or subscribe to her weekly podcast wherever you like to listen. All interviews are recorded and posted the following week with links to resources you heard discussed on today's show. Underwriting opportunities available upon request.

Kerry's goal is to help you live the American dream.

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