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Hey, everyone. It’s Andrew Warner, founder of Mixergy.com, Home of the Ambitious Upstart. Still dealing with a cold, but ambitious as ever. And you guys know the goal here on Mixergy. It’s to interview a series, a mix, of successful entrepreneurs to find out how they built their stories, and to bring those stories to ambitious upstarts, who are just eager to learn about how other people built their businesses. And today, I’ve got with me Noah Alper. He is the founder of Noah’s Bagels, among other companies. And I’ve got a quote here from you that I saw online, Noah. You said, “You don’t have to have the next Google. You can have a lot of downturns and personal challenges, and still succeed.” And boy, did you ever, with Noah’s Bagels. And you did have downturns and challenges, as we’ll talk here in this interview. You launched a business in ’89, and you sold it six and a half years later. Can you say for how much?
Interviewee: One hundred million dollars.
Andrew: One hundred million dollars to Einstein Brothers Bagels.
Interviewee: Correct. Now I wanted to make it clear that, at the time of the sale, we had venture capital money. Starbucks was a partner. My brother was a partner. Store managers, assistant managers, so there was a lot of people sharing in the proceeds of the sale, not just me.
Andrew: So what were saying is that a hundred million dollars isn’t sitting in the closet behind him right now.
Interviewee: Correct. Correct.
Andrew: [Laughs] All right. Well, let’s find out how you got there. But before we do, let’s find out where there was. When you sold, how big was the company? How much of an impact did it have?
Interviewee: We had 38 stores, from Seattle to Los Angeles, and we were on a rapid expansion program, specifically in Southern California and in the Pacific Northwest. And it was the height of the bagel business, of the peak, I would say, of the bagel business. So the truth be told, and not obviously entirely intentionally, we really did, were able to, I think, capture the maximum value of the business by means of selling it when we did.
Andrew: You sold just before “carbs” became a four-letter word.
Interviewee: Correct. Correct. When the business first started, carbo loading was “the” thing. And what I like to say is it took people six and a half years to realize that if you are doing carbs, and you’re not running marathons, you got fat. At which point, we sold the business.
Andrew: Well, I’ve got to say, a bagel a day isn’t a bad thing. I understand that people want to lighten up on their carbs, but I don’t have them here in Buenos Aires where I happen to be now, but I have a bagel every morning for breakfast. And I love it, and I haven’t gained much weight from it.
Interviewee: Well, no question. And beyond that, I think it’s important, Andrew, to understand that, especially back in the late ’80s, bagels were looked at in comparison with the donuts, which was the breakfast pastry of choice in those days. So when you compare a bagel to a donut, there’s clearly major, major differences, in terms of health attributes.
Andrew: I like the power of reframing. So before we go into how you got here, let’s talk about one more thing. What’s the best part of having sold a successful business? What has it allowed you to do that you couldn’t do before?
Interviewee: I think flexibility, in my case. Look, I’m not a real materialistic type. I like to travel. Obviously, I like nice things. But it wasn’t like…
Interviewee: Obviously I like nice things, but it wasn’t like all of a sudden my lifestyle changed dramatically. It was more that there were options, that I could do community work. I could do volunteer work. I could do, you know, I could do, fundamentally, what I wanted to do, not what, it wasn’t a requirement to be at the job, you know, on a regularly scheduled-type basis. And I think that flexibility was the most important thing to me.
Andrew: Yeah. A lot of freedom, it sounds like, also.
Interviewee: Hmm-hmm. I mean the older you get, I think that you start to value time, in addition to money. And having time to myself was just a tremendous gift.
Andrew: All right. I’ve got here on my screen what I often do when I interview somebody, which is a list of the companies that you’ve launched. And it’s so long that it can barely fit on my screen here.
Interviewee: Uh-hmm.
Andrew: And these are just the professional businesses, that you launched as an adult. Were you always like this? Were you someone, who even as a kid, was launching lemonade stands, and selling things on the side?
Interviewee: Yeah, I’m just that kind of guy. I thrive on, you know, transactions, if you will. And so even at summer camp, I had like cans of ravioli in my suitcase. And I had a little electric frying pan. And I would be selling the kids at camp, you know, plates of ravioli in between meals. And then lemonade stands. And I had a business shoveling snow, because I came from New England. And also, taking people’s trash barrels out for them and then returning them. That was in the days when they were these big, heavy, old things, before the wheels came on. And so yeah, I liked to start businesses. That’s exciting for me and fun.
Andrew: What did you learn as a kid, building businesses and selling? Do you remember any of those lessons?
Interviewee: Well, I remembered that customers don’t come in one size or shape, and that you have to deal with them differently. I remember, even when I was taking out the barrels, and I went out to raise rates, there were certain of them, “Oh, whatever we’re paying you is half what you’re worth. Oh, you need to cut your rate in half because we’re way overpaying you.” And I learned this as a young guy that, you know, first of all the customer’s always right. But secondly, that you have to sort of approach them in different fashion. And communication is really, really important to making yourself clear.
Andrew: I grew up in New York. And I used to shovel snow on the snow days when everyone would be excited that they could stay inside and watch TV. I’d get all excited that I could go out and shovel the neighbors’ snow.
Interviewee: We’re cut out of the same cloth.
Andrew: Same part of the country, and for me, the big lesson was how to negotiate for the price because those people in my neighborhood were canny. They would low-ball me all the time. But I learned in time if you just asked for a higher price, there’s a good chance that you can get it. Not always, but there’s a good chance you can.
Interviewee: Right, right. I think that’s true. It’s certainly better than going the other way, because they’re never going to go up. [Laughs]
Andrew: Yeah, right. [Laughs] And my parents encouraged me to do these businesses. They were proud of me when I did it. They would tell their family and their friends over dinner that their son was starting these little companies. And that’s what encouraged me to continue in entrepreneurship. Did you have the same experience?
Interviewee: Actually not. Not that my parents weren’t supportive of my entrepreneurial ventures, but my dad was kind of a, he was a great mentor to me. And I loved him dearly. And I dedicated my book to him. And he was tremendous influence on my life, but he kind of a tough driver. And the biggest compliment I ever got from Dad was, “Your Uncle Harry told me that you were selling your gourmet house…” And that was about as big as it got. [Laughs]
Andrew: I apologize. Just as you were saying the big compliment, we lost the connection for a second. Can you repeat that, please?
Interviewee: Ah, yeah. At one point, Dad said, “Your Uncle Harry told me that he was very impressed at how far and wide you were selling your housewares.” And that was it. That was as big as it ever got, in terms of compliments.
Andrew: Is it that he didn’t compliment at all, or just that this wasn’t the direction he was hoping you would take in life?
Interviewee: I think no, no. He was supportive of what I was doing. But he was of the old school, where too many compliments would get you spoiled and soft and lazy. You needed to, you know, you needed to sort of tough it out, and soldier it through, and work on internal appreciation and internal rewards, and not expect the world to hand it to you on a silver platter.
Andrew: I see. By the way…
Andrew: I see. By the way, I see that there’s a little bit of a debate here in the live chatroom. People are saying, “Is it that the customer is always right? Or maybe you need to pick the right customer, and then say, ‘The customer I want is always right’,” says Peter Kahn. What do you think about that?
Interviewee: Well, that’s a good distinction. I think that’s a very good distinction, but the net effect is that you have, in a sense, picked them, if they’re a customer. You know, you’ve chosen to be in one space or another. And you can’t always hand-select them, either. You know, in any given business situation, you’re going to get difficult people. And sometimes your best customers are the most difficult ones. And you have to deal with them. But yeah, I mean if you have the option of weeding out customers that aren’t what you desire, then you certainly should, if you have the quantity to be able to make that kind of decision. I never had that luxury. I always sort of took what I could get, and sold them as much as I could.
Andrew: You know what, though? It seems like you did a little bit of that, too, because at Noah’s Bagels there were customers who wanted bacon, but that customer wasn’t right in your space.
Interviewee: Right.
Andrew: You picked a certain kind of customer.
Interviewee: That’s a good point. That’s a good point. I will admit that, that yes. I will qualify by saying any business that people start, there are always going to be people who, for some reason or another, want you to stray from your core mission. You know, be it a product line, be it service, whatever, and I think that flexibility, the customer always right, very important perspective. But I think that beyond this or that parameter, we don’t go. This is what we do. And I hope that we can satisfy your demands. But if it’s outside these parameters, there’s really nothing we can do because that’s what we do.
Andrew: OK, let’s start with, as we go through the list of companies that you launched, how about we start with Bread and Circus? The company you started in ’73, you sold it in ’76 to Whole Foods. What…
Interviewee: Sorry to interrupt. We didn’t sell it directly to Whole Foods. And I wanted to make this very clear, that Bread and Circus started as a ma and pa natural foods store, at a time when such things were very rare in the American landscape. We sold the business in ’75, and the gentleman that we sold it to then really developed the business into the largest natural foods chain in the Northeast. And then in 1994, it was then resold to Whole Foods. I just wanted to make that clear, that it wasn’t, I didn’t do that expansion program. I wanted to make that clear.
Andrew: Ah, thank you. I didn’t know that. OK, so when you launched it, what was the vision? I mean…
Interviewee: The vision, the vision was a combination of a fabulous natural foods store, and a store that would sell what later became known as lifestyle items. So chopping boards and Cuisinearts, and wooden toys, and in those days, in the early ’70s, it was sort of like New Age general stores, which I guess you would say this kind of fit into that category, at least on the non-food side of it. The food side of it was sort of, I guess you would say, a miniature Whole Foods market. And again, as I said, most of the competition in those days, was not from other natural food stores, but it was from health food stores, which was a very different kind of a vitamin and distilled water and Tiger Bars, and that kind of a store. Whereas we were a place where people could do a week’s worth of grocery shopping. It’s a very different concept. And the food aspect of the Bread and Circus, because it was the essentials and the non-essentials, there by the name, really started to do 90% of the business. So as we expanded the store from a single storefront to a double storefront, we gave significantly more space to the foods, because that was what was doing business.
Andrew: Were you thinking that this was going to be the future of supermarkets, or that there would be a market for this, a space for this, in every major market throughout the country? Or did you just say, “I’m going to launch one store and do well with it”?
Andrew: …or did you just say, “I’m going to launch one store, and do well with it”?
Interviewee: My philosophy in all of the businesses I’ve started is start small, do the job right, and see where it goes. No exception for Bread and Circus. But I didn’t see, I looked when I first started Bread and Circus, I wasn’t even sure the place was going to make it, because it was a little bit ahead of its time. And a lot of people didn’t really understand what we were doing in there. In the course of the three years or so that we had the store, the knowledge curve started to kick in. The learning curve, rather. And people started to understand what it was. And as we saw it progress, I did, yes, clearly see the trend towards a supermarket-sized operation, because we needed more space to be able to bring in more products, and to show what we had in a more dramatic way. It needed, fundamentally, to turn into a supermarket. I saw it going in that direction. And I didn’t really want to do it. But I saw it moving in that direction. And that’s, indeed, what the purchaser of the business, the direction that he took it in.
Andrew: Why did you sell?
Interviewee: The confinement of being in a retail store, the amount of time that we spent in that store, just kind of got to me. I’m the kind of guy who loved to start businesses, and then once they’re up and running, and things are going well, you know I get kind of bored, and I want to get, you know, back to starting something different. So it’s all the creativity of the startup is what turns me on.
Andrew: So could you then have launched other locations, and funneled your energy to start something new towards each one of the new launches?
Interviewee: You mean Bread and Circus?
Andrew: Yes.
Interviewee: Yeah, I mean yeah. The next step was to dramatically increase the size of that store to a full line supermarket-sized store, and then crest to create a chain out of it. The life of a retailer is a very hard life, especially in the food business. You sort of have to be in love with the green beans. You know, you’ve got to be able to… It’s a totally all-encompassing, obsessive-type of business. Certainly you can hire people to do these various functions, obviously. But nevertheless, in a small retail grocery-type environment, the owner needs to be all over it. And it just wasn’t something, at that stage of my life, that I had the sort of patience to do. I just wasn’t cut out to sit in a retail store, and to slowly increase its, you know, increase its size, and so forth. Again, as I said, yes, I could have done it. My father was in the food business. I had a food background. But once the thing was up and running, and I was getting positive response, and we made money, you know, and then it was time to move on and start the next thing.
Andrew: [Laughs] How much did you sell for?
Interviewee: What can I say?
Andrew: How much did you sell for?
Interviewee: Oh, I think it was something, and this was ’73, I think it was something in the neighborhood of 25 or 30 thousand dollars, of which most of it was, we took back in the form of a note. So it wasn’t, you know, a huge exit strategy there. But it did allow my former wife and I to travel in Europe for three months. And that was pretty huge, especially having been confined like that, in that retail environment. To get out and sort of do our thing was pretty exciting.
Andrew: So what was the next business after that?
Interviewee: So I had even before Bread and Circus, I had a business selling rustic salad bowls from Vermont. I was first of all selling them, believe it or not, on the sidewalk, and then also had like a wholesale aspect to it as well. We were selling these salad bowls to gift stores and cookware stores, of which there were many in those days, in the Boston area. After getting back from this trip to Europe, I dramatically expanded the housewares business, to not only include rustic made, with the salad bowls from Vermont…
Interviewee: …rustic made, wooden salad bowls from Vermont. But fundamentally, artisan-made housewares from around the world. We imported from 8 countries, and towards the end of my tenure in that business, we had 2000 customers nationwide. Again, a couple stores, department stores, gift stores, by then, the catalogs and lots of different kinds of avenues of distribution.
Andrew: So what was it about that that kept you engaged and got you excited longer than Bread & Circus, it seems?
Interviewee: Yeah, well, first of all, there was a lack of confinement. I could get out, and I could do things. I was going to trade shows around the country, roughly around 25% of the year. I enjoyed that, I enjoyed meeting our customers and our sales reps in person and getting to understand nuances in different markets across America. How our products were more suitable to one than another, and how to market them. And just listening to the customers, and getting a pulse on the business and its localities was extremely interesting to me. The product line kept changing in that business. It’s all about what’s new and what’s exciting, because a lot of it is gift-oriented. So, there was always new things to look at, to buy, to bring to market, and I really enjoyed that part of it, to just sort of gauge what response was going to be, and then to yield the results of a successful purchase. I love the foreign travel. We were, as I mentioned, had imported from 8 different countries, going around to these countries and seeing them as an insider, as a business person, going into factories and so forth. And rather than sort of the tourist route, I found fascinating and really interesting. And the idea that, in one week you could be in a trade show in Chicago and the next week, you could be in Japan on a buying trip, and then have a little time in home base to work with the staff and the sales people. So it had a lot of diversity to it, and I enjoyed that, I enjoyed being able to go from function to function.
Andrew: What’s your motivation as you’re building businesses? I know for me, that I always envision myself as being king of the world, eventually. You know, this thing is going to grow and be huge and huge and huge. I’ll make lots of money, I’ll get lots of fame. And that’s what I use to sometimes drive me on days when I’m exhausted, or when it feels like nothing is going to work. It shakes me up and gets me back out. What’s yours, what’s your touchstone?
Interviewee: That’s interesting. I don’t really look at that, look at it that way. I look that the customers are satisfied, that they’re really excited about what we’re selling, and that they come back for more. And that, it’s very interesting from different perspectives, and that the business trend is up. That we’re growing, that we’re continuing to grow, continuing to show profitability, more so than last year. So, for me, it’s about a positive trend line versus a big score. Until the Noah’s experience, all the businesses that I started were very really quite modest in scale. They were sort of big, one man bands, if you will. And the Noah’s, by the end, we had a thousand employees. It was a whole different paradigm. And I enjoyed that, but getting back to what really excites me is just coming up with a concept and seeing it stick.
Andrew: I see.
Interviewee: That excites me.
Andrew: Kind of like an artist, where an artist paints or sculpts. An entrepreneur has his own art, and you want to see it grow. Just want to see…
Interviewee: I really think that you have hit on a good analogy for me. I never had painting or drawing or musical skills or whatever. But I do have a lot of visual acumen, and I’m able to sort of see things before they’re there. To see, for instance, a Bread & Circus. It was an amalgam of two different stores that I like very much in Boston. And when it got through, I could see that not only had I hit the high points of those two operations that I so much admired. It blended together, but in the blending, it became a new entity altogether. So, it was like a [Brodan] nude picture, developed from materials of a previous one.
Interviewee: …developed from materials of a previous one. And that, yeah, and that was very exciting for me.
Andrew: Someone in the audience here, a guy named Brazil, says, “I’m sure Andrew has butterflies when he asks the how much question, and to have the awkward silence.” I do. It’s true. There’s some questions here that are just unnatural to ask in person. But because we’re in a setting where we’re trying to learn from your experience, I have to ask it. And if I have butterflies, I just silence them and continue. And you can always say no if there’s a question that I ask that you feel uncomfortable with. But it seems you’re open about things.
Interviewee: Understood.
Andrew: Thank you.
Interviewee: Yeah, I think that, you know,
Andrew: No, no, please. You continue.
Interviewee: I’m sorry. Oh no. I just for a second did digress, you know. I think that probably your audience knows my book, Business Mensch: Timeless Wisdom for Today’s Entrepreneur, and we’ll talk about it later. But I’m referencing it in the sense that people have complimented me on the book, by way of saying, “You know you’re really open. You know you’re talking about the good, the bad, the ugly, some very personal stuff, and it’s all kind of out there.” And my perspective is, hey, if I’m going to come clean and you know, now of course you’re going to ask a question I’m not going to answer. Presumably, I will try to answer every question because I think it’s important to, if people are going to learn from this and gain an experience, they don’t want a sugarcoated presentation. They want to know what’s really going on.
Andrew: And the book is, I want to make sure that the transcribers and the audience hears, is ‘Business Mensch’. If you guys are watching us and not listening to the audio, or reading the transcript, then you see it over his shoulder, the book is right there. There it is, ‘Business Mensch’. I know what ‘mensch’ is, ‘mensch’ is a good guy, right? You think people don’t know what ‘mensch’ is?
Interviewee: Somebody who does the right thing when no one’s looking.
Andrew: Right.
Interviewee: That’s…
Andrew: And that’s always been important to you?
Interviewee: Yeah, I think that again, getting back to my dad. I mean, he modeled that for me. He modeled for me that you take care of your employees and they’ll take care of you. You take care of your community, and they will take care of you. We’re all in this together. And it’s important to do the right thing. And he not only talked about it, but he did it.
Andrew: All right, let’s go to the next business. This is one that is set back, but you talked this in the book, and you’ve talked about it publicly. Holy Land Gifts, you launched it in ’85, closed in ’89. What was that business?
Interviewee: Right. Well, that business was importing gift ware from Israel, and selling it here to fundamentalist Christians here in America. It was at a time when Ronald Reagan was in power, and I heard a statistic that 1 out of 3 Americans had admitted to a born-again Christian conversion. At that time, I had been to Israel for the first time. Being Jewish, it was a very thrilling experience for me. I didn’t grow up in a religious home, but it was a sort of a, if you will, a tribal kind of a pride, that really discovered pride and curiosity in the state of Israel. And I came back so excited that I wanted to tie my next business to the Jewish state. And when I heard the statistic, I felt, hey, this is it. So, the idea was first, it morphed a little bit, it was going to be packaged foods, and then it eventually became a mail order catalog. And it was sort of a total disaster from the very beginning. I didn’t really understand my customers, I hadn’t done proper research, I was having problems with some of the products. My positioning was off. I mean, there really wasn’t anything that was right about that business. But what I learned about it was really a couple things. First of all, the fact of drawing a distinction between a social venture and a business opportunity. In the case of Holy Land Gifts, it was really about trying the strengthen the Israeli economy. That was my primary motive, and I was willing to put on rose-colored glasses and pretend I knew what I was doing when I really didn’t, because I was so fired up by that social mission. And I’ve warned, and I’ve encouraged social entrepreneurs in academic settings that I’ve been involved in lately as a student advisor and so forth, to make sure that your social venture is grounded very solidly in hard business protocols.
And in the case of building in [gifts] step was not the case. And roughly, it was a long slug, but after three or so years, I finally threw in the towel. And it was a difficult defeat, because it was really the first business that I had failed at. And beyond losing $50,000, which is a fair amount of money, especially in those days for me, it was kind of a pride issue. Boy, am I the kind of guy who start another business, or is, say, kind of had a couple of lucky breaks, and that’s it, end of the line? Well, I think it kind of got me hungry again, it got me motivated to really, to succeed, and as proof to that, later on I went to develop Noah’s Bagels. And the first store, the landlord said to me, a year after the store was opened, ‘you know, Noah, [??] choice, the Holy Lands Gift Company, but you had such a fire in your belly, that I knew, that no matter what you opened in that store, you were going to succeed.’ And I talked in my book about ‘come back stronger’. And in the case of the failure of the Holy Land Gifts, it definitely was the case for me. And when I’ve talked to people in audiences, when I’ve spoken at them across the country, what I encourage them is, that every successful entrepreneur, at some point or another, is going to have failures. And often multiple failures, and the point is, this business failed, but I am not a failure. And to be able to separate the two; very, very, very, very important thing for entrepreneurs to learn.
Andrew: I want to dig in deeper into failure. But first, two things. First of all, I got to tell you that the audience is loving you. I’m seeing here from Aaron, ‘this is a fantastic interview. Us web folks have a lot to learn from old school offline entrepreneurs.’ Peter Kahn agrees, Joseph agrees, Aaron L. is saying ‘more interviews like this’. People are loving this. ‘Amazing’, from guest 40271, who didn’t even come up with a name for himself, and Moses, ‘thank you’. Before we get into failure, I got to ask you about the place that a social mission has in business. Is business a place to have a social mission, or are we better off thinking just about our customers, ignoring our own missions while at work, taking our money that we earn by satisfying our customers and only their needs, and then in our off time helping the world?
Interviewee: There is a compelling argument for both of them. There really is. And I think if you can combine them, you’ve got a win-win. I think that the social entrepreneur movement, if you will, really expanded tremendously during the expansive economy, OK? So, there was a lot of [??] failure in that kind of environment, and I’m not sure there is now. So, I can’t say there’s a clear argument for one direction or another. There are a lot of young entrepreneurs, and I think it’s very exciting to tie personal passion in with business. And I think in many cases, your business is a lot more successful if you talk passionate about the product, and aluminum siding isn’t something you can get that excited about. But if you’re, one student I worked with was from Sri Lanka, and was very interested in helping the indigenous rice farmers compete in the world market. And he was developing a certain proprietal kind of red rice and was trying to sell it to Trader Joe’s and upscale markets in America, so on and so on. I think, in that case, I think that if he’s smart, and if uses solid business practices, he may very well be able to combine his passion and his social mission with a successful business. But I think that it, that getting the fundamentals of business, and does this makes sense from a business standpoint, as the first perspective, and then, oh by the way, there’s a strong social mission. It can be a good direction, but one done very carefully.
Andrew: OK, all right. So, let’s go back to what you said about failure. At what point did you realize that the company wasn’t working out? How did you realize it?
Interviewee: The Holy Land Gifts?
Andrew: Yeah.
Interviewee: It wasn’t too hard to figure out. I mean, there were very few orders that came in, it was a mail order business, and very definable…
Interviewee: …and very definable. And then, I remember on a particular Friday, I think 10 orders came in and they were very excited. I’m like, this whole thing is turning around. And by the following Monday, it was down to like 1 or 2, much like it had been before. There was no pulse in that business. It was a flat-line, and…
Andrew: You were with it for four years, and I know as entrepreneurs, we often think that we can do anything. And when things don’t go well, and we only get one order, we say ‘I’ll find another way, we’re just getting going’, and you make excuses, not because you’re an excuse maker, but because we’re trained as entrepreneurs to see the world with rose-colored glasses. So, at what point did you say ‘I got to …
Interviewee: You’re right. You’re right, that kind of, as I mentioned, this, the gift catalog aspect of that business was preceded by an attempt to sell packaged foods. As I’ve mentioned, I went through the exercise of bringing these items to buyers, supermarket buyers, and I got little to no response. So I changed directions into mail order catalog, to your point. You know, there’s an idea here, how can I re-jigger it to make it work? At the time which I mentioned, when this sort of turning point where, you know, this is just before Christmas, this mail order catalog had dropped to, I don’t remember how many thousands of people, the statistics weren’t there. The numbers were not there. I had, furthermore, and I think in that case, more practically, I had a family to provide for, and there was a need till I make money. And this thing, I guess what I’m saying though, in a nutshell, Andrew, is it’s extremely important for an entrepreneur to know when to throw in the towel. It’s extremely important. And all the signs were there that this was not a business. And there was no way I could fool myself any longer.
Andrew: All right, can you take us through what you were thinking as you were, as the business was failing? What was going on in your head? And how, and I know as you say this, that we in the audience will identify with it either now or in the future. But, I’d also like you to tell us, what would you say to yourself today if you go back and talk to the person who had all these negative thoughts in his head? So what were you thinking, and how could you snap out of it today?
Interviewee: I would say that nothing is forever and that’s something that’s hard to understand when you’re young. But when you’re older, you see friends dying, you see illness [break in audio] tragedy, horrible things. That’s on the negative side. But, you’re able to see, I mean, there are not a lot of things that are great about getting older. But one thing that is, is that you get to see things over a sweep of time in your own life and what you’ve observed. And you can see that there is a beginning and there’s an end. And when you’re in the middle of a business, and you’re a younger person, there’s sort of no end to it. There’s like there’s this sort of intensity and fervor, and you’re entranced by it, and there’s no way out. When you get older, you can see that there’s, there can be life after a failed business, in other words. And that, as I said earlier, the ability to draw distinction between a failed business and a failed person is important. I saw, for instance, in the way in from New York, giving a talk from my book, a huge billboard that said, only in New York would there be something like this, in huge letters, ‘Recession 101: Self Worth Defeats Net Worth’. And that kind of to me encapsulates it, that, this too shall pass.
Andrew: OK, yeah, that’s true, this too shall pass, even the good stuff shall pass.
Interviewee: That’s it.
Andrew: Let’s see where to take this interview next. Actually, you know, how about this? Fair point, that from a failure often comes the greatest success, Napoleon Hill said that ‘in your worst failures there is a seed of an equal or greater success.’ And it seems to have happened for you because the year you closed down Holy Land Gifts is the year you launched Noah’s Bagels, Noah’s New York Bagels, the big hit.
Interviewee: Right, no that’s precisely it, and you know to your point, I mean, this was, the Holy Land Gifts was a total and absolute failure, and then within six months I had a business that, I had a tiger by the tail. We had so many customers coming in that store that we could not serve them all…
[the recording becomes garbled for a couple of seconds here]
interviewee: ..changing methodologies on a virtually daily basis. We built the store very reasonably because, coming from this, on the heels of this failure, resources were limited. As an example, we had a linoleum floor in the store which we had to rip up within three months, because we had blown right through it. So, you know, it was all the way up and down the line, I would drive in on Sunday morning, there’d be lines snaked around three blocks to get into the store. So, it was just an incredible reversal from the previous business and it was absolutely thrilling
Andrew: What was it about it, what was the formula that made it so successful?
You know, I was speaking to an eighth grade, it was sixth, seventh and eighth graders, and I asked the kids, “What’s the most important thing in the retail business?” and one precocious kid said, “location, location and location, okay, those are the three most important things.” So, look, we had a wonderful location. We were in Berkeley, California, one mile from the university, we were also in the midst of a whole little gourmet setting where there were all kinds of independent specialty food stores of all descriptions. We had a very visible location, we had our own little parking lot, we were a half a block from a major supermarket, we had it all going for us there. number one. Number two, bagels in the late 80’s, we alluded to it earlier. It was the peak, getting to be the peak of, well it wasn’t, actually it was more like sort of the beginning to the middle of a huge bagel boom, and we rode that wave in a very dramatic way. Thirdly, San Francisco bay area, where we were located, is known for every manner of fantastic ethnic food. The first gourmet products show was held in San Francisco, and I showed at that trade fair with a housewares line, so here we are in the middle of it, and you know what, there wasn’t really a great bagel. there wasn’t a great bagel in the midst of this gourmet scene, so we had, you know it was kind of like I don’t know what the perfect storm is when it’s the opposite of something that’s about to implode. it was the perfect, all these factors came together, is what I’m trying to say. There wasn’t one silver bullet, it was a package and I think you know, beyond that, we had fabulous product that, i had found a great recipe on the east coast, I had brought expertise out to help deliver that product, and I think lastly, the two pieces that took us from being successful to being mega-successful, were our attitudes towards the community and towards our employees, where we would be very attentive to the localities that we served, we
would always do a community service project in every neighborhood that we went into, even before we opened a store. We would bring the crew of 30-35 people, we would pay them for the day. In one case in Venice Beach, California, we painted an on woman’s house, 8 o’clock in the morning, ram shackled old place. She comes back at 6:30, it’s like a brand new house. The community loves us, our employees loved us, to have this opportunity to work together to do something beyond themselves. They came to work the next day excited to be working for this company.
Andrew: How did you think up that idea? Here you were, you just got burned being socially good in a place where you’re supposed to make a profit, and you come up with this idea. How did it occur to you? PR people?
Interviewee: That’s an excellent question. This idea evolved. This idea evolved, it didn’t start right off the gate. We started off doing small things, and i think it was things that I learned from my Dad and I think it was also things that, you know, I picked up from spending time in New York and seeing how things operated there. In New York, all of the Jewish delis and the bakeries…
Interviewee: …Jewish bakeries and delis and whatever, that all have charity boxes on their counter. OK. So you know what? We’re going to be an authentic New York place. We then put our charity box on the counter. All right. And then, you know, people would come in and ask for product donations for the Little League, for the local school, for the Girl Scouts, for whatever. Of course, have a dozen bagels. Have two dozen bagels. The first day we had a leftovers because, you know, the rye, the whole wheat, you know, they tend to be amongst the slow movers. I was taught to not throw out food. So I walked around like a Jewish Santa Claus, with these bagels in a big plastic bag, and took them to People’s Park, which was a homeless camp then, and gave them to the guys. At which point they said, “Where’s the poppy and sesame?”
Andrew: [Laughs]
Interviewee: “You know, you’re only giving us the rye.” But that’s another story. But the point is, the point is, I think that it was a perspective that the, and I want to distinguish between this and the Holy Land Gifts business. The Holy Land Gifts business was, fundamentally, a social venture. OK? The goal: Help strengthen the Israeli economy. Noah’s Bagels was a for-profit business, for which these community programs added to the customer loyalty, beyond being what I saw as the right way to do business. But I think it was the notion of help the community, and the community will help you. It wasn’t the end vision of the business. And I think that was the distinction.
Andrew: The idea, though, to paint the house. Is that a PR move? Is that a PR company that came up with it? Did somebody else with some press experience suggest it?
Interviewee: No, what we did is before we would go to these, open the stores in these various locations, we had a Community Outreach person. And we would ask them to, you know, to go the locale, and start talking to the local community leaders, and tell them that, you know, Noah’s Bagels was coming to Community X, Y, or Z. You know, we want to be part of the community. What would you like to see out of us? How can we help you, in other words? And from that, we, you know, we learned various sort of, and from a kind of a Machiavellian standpoint, I would have to say, we would find organizations that had a lot of impact in the community. This was cause marketing, OK, what some people refer to these programs as. This was out of our marketing budget. So we would identify not only good causes, but causes for whom the work we were doing would make some noise.
Andrew: I’m going to have trouble after this interview, because now people are asking me to do more interviews with offline entrepreneurs. I’ve got to stay focused. I just had a great opportunity here with Noah Alper. Noah, you used to employ an guy named Jim McCarthy, who’s now running an incredible internet company called GoldStar Events. I interviewed him.
Interviewee: Yeah.
Andrew: He talked about you,
Interviewee: Yeah, love him.
Andrew: and how much he learned from working for you.
Interviewee: Yeah.
Andrew: And he said, “Andrew, you should interview him.” And he made this introduction. What did he do for you guys?
Interviewee: Uh-huh. I know he did. Jim was a store manager, and he was one of the best and brightest. And you know, it was interesting with people like Jim because when I started out the store, I had this notion of hiring people who were going to there forever. You know, because that’s, you know I come from New England, old school, and so forth. So I remember in one case, I had a woman who, you know, wasn’t the brightest, you know, person in the world, but very loyal and competent. And I didn’t need that bright. I needed somebody who could schmear a bagel, and who could give the customers a smile, and could do the job right. And I thought, you know, if I groom her and train her and so forth, you know, she’ll just, you know, where’s she going, OK? You know, continue to give her raises, she’ll be there the rest of her life. Well, six months later, her husband got transferred somewhere, and she was gone. And that kind of made me realize that, you know what? This business, they come and they go. There’s nobody going to be here forever. Now, a guy like Jim, I knew wasn’t going to be there forever, because he was too good to be a store manager. Nothing against being a store manager, but Jim had clearly the wherewithal to be on a higher level, and we would try to get people like that, and we would understand…
Andrew: He stuck with you? As I understand it, he stuck with you till after the sale? But then, he moved on right afterwards.
Interviewee: Right. Yeah, yeah, yeah.
Andrew: But he said ‘part of the problem was…’
Andrew: But he said, part of the problem was that the soul of the company was gone. It wasn’t that the company was dead afterwards, it just wasn’t your environment, it wasn’t his environment anymore. And he gave an example, he said ‘only a small percentage of the customers cared that the bagels were kosher. But as soon as you stopped making them kosher, the rest of them felt it wasn’t the same business. And so, it lost a lot of its spirit that way. So, what about that? What about…
Interviewee: All right, go ahead…
Andrew: What about the kosher thing? And what about the whole…
Interviewee: [lost audio] the whole Jewish…
Andrew: Yes, how much of that was just to create the atmosphere of a real bagel store, and how much was it you needing the place to be and feel like it’s yours?
Interviewee: You know, it was really both of them together. I think that’s why it was such a home run, because it came from an honest, earnest, deep place in me, but it also came from my intellectual hard and rigid business principles. We talked about my dad. There was no allowance for any b.s. with dad. Was this thing going to make money, was this investiture in these kids going up and doing the service project, were you going to get a return on that money, or weren’t you? Because if you weren’t, don’t do it. Do that on your own time. So it was a blend of the two. To get to your question, I’ve come to believe that there’s a certain, you talk to, in terms of your own experience about how, what sometimes gets you driving when you’re overwhelmed and whatever, is the notion where this thing could be. I think, sometimes, when it gets to where you want it to be, you don’t really want to be there. It’s the only way I can put it. In the case of Noah’s, when we, even at 38 stores, had to be making certain compromises, OK, in quality, because of the nature of the distribution and the…
Andrew: Like what? Do you have an example of how you did that?
Interviewee: Yeah, yeah, I have an example. OK, so, we prided ourselves obviously on the food, first and foremost. OK, so we were making home made cream cheese schmears, and a schmear is Yiddish for what it sounds like, you schmearing the thing around. OK, it was a cream cheese spread, if you will, OK, with different flavors in it. And we would churn it up in the back room, and it was fresh and it was just out of this world. Then as we got a little bigger, we would have a truck running around to six or eight stores with this stuff made in the central location. Well then, the business started to get bigger and bigger, and we had regions. All right, and then, at some point, I was told by our production people that we needed to put preservatives into these schmears, because otherwise they couldn’t hold up to the transport that they were going to be going on. And at that time, I knew that my days were numbered there, because that wasn’t what I built my business on. Now, in order to get that business to the scale that it could potentially reach, it had to sort of kick up to a notch that I wasn’t so comfortable in. So, even though we hadn’t sold the business at that point, I knew that my days were numbered, because I wasn’t happy about that. But I understood from a kind of pragmatic business standpoint, that that’s probably something we needed to do, was to put those preservatives in.
Andrew: All right, we talked about how after Bread & Circus, after you sold that business, you went to Europe. After you sold Noah’s New York Bagels, what did you do? How did you treat yourself?
Interviewee: First, I went to Jerusalem, and I spent a year at a yashebo, a sort of a school of higher learning in Jewish studies. We have a 3,000 year old tradition, I had a lot of catching up to do. I had very little background as a kid, and I wanted to sort of just get a survey of all this knowledge that I didn’t have. And I took my family with me, my kids were in public school there. My wife was doing volunteer work, we had a tremendous year of discovery and as immigrant experience, if you will. Got back at the end of the year, if you want me to continue, do you want me to continue, or do you want me to…
Andrew:
Interviewee: Do you want me to continue? Or do you want to… Shall we just…
Andrew: If you have time, I would love it. I don’t want to encroach on your time, but I stay here for hours, if you had it.
Interviewee: Yeah, I’m hear for you for about another five minutes, I realize,
Andrew: Oh, OK.
Interviewee: which is good. I’m having a good experience. So I went on to found a, yeah, a Jewish community high school in San Francisco. It was a four-year, full time, volunteer job. And I loved it. It was, I feel, that at the end of the day, that there was a lot more lasting satisfaction having started that enterprise, than even starting Noah’s Bagels, as big as it got. After four years, I had a hankering to get back into the food business because food people often can’t totally get away from it. And I started a Kosher Pescatarian vegetarian restaurant in downtown Berkeley. Only in downtown Berkeley could you have such a restaurant. We had a good four-year run, with Ristorante Raphael. Unfortunately, at the end, the profitability wasn’t there. We needed to close it down. It was a break-even kind of situation, but we had a lease renewal coming up, and kind of like the Holy Land Gifts, the signs weren’t there. I then went into business consulting, which I’m doing now, helping entrepreneurs and small businesses with executive planning and marketing and mentoring. And then about two years ago, decided that I had a book in me that needed to come out. And Business Mensch: Timeless Wisdom for Today’s Entrepreneur, was the result of that, which I released last September. And I’ve been out promoting the book nationally, and doing business consulting as well. And that brings us up to today to talking to you, Andrew, and enjoying myself tremendously.
Andrew: Let’s take one of the messages from the book. You say, “Have a little chutzpah.” What do you mean by that? And how did you do it in your business?
Interviewee: Well, in all of my businesses that I’ve started, I really didn’t know the first thing about them when I began each one. So I didn’t know anything about the housewares business. I didn’t know anything about bagels. I certainly didn’t know anything about religious gifts. And yet, I had a sense of I can learn on the job. So that took a little chutzpah. But I think that what sort of got me through was that, except in the case of the Holy Land Gifts, and I’m not convinced that wasn’t a good idea, it’s just that the execution was bad. I should have been the middle man. And I should have had, as the face, somebody in the Christian community. And I should have been more behind the scenes. And I think it might have worked. But the point I’m trying to make is, while I didn’t have the expertise to be doing these businesses, I was in the right thing at the right time, and I’m a quick study. And I was willing to learn from a lot of people, and to take other people’s input, and not assume that I knew everything, because that’s one thing that’s held me in very good stead. Many entrepreneurs, and especially the successful ones, say, “Oh, on business two, I’m going to very successful because, hey, I’m a successful entrepreneur.” I had the impression all along that I was running, you know, running on the seat of my pants. And I’d better get a lot of input, because, you know, otherwise the thing was not going to make it, based on my expertise. So I think that’s an example of chutzpah.
Andrew: What percentage of Noah’s Bagels did you own in the end?
Interviewee: Fifteen percent.
Andrew: Fifteen percent of the business.
Interviewee: Right.
Andrew: OK. Final question is a bonus question. I’d like to try something new here, and maybe turn it around, and have you ask. We’ve got a great live audience here. We’re going to have an even bigger audience in the recorded version. I’d like to have you ask us a question, ask the community a question. Maybe something about internet marketing. Maybe something about building a business online. And I’ll run it up on our community site, FoundersMix.com.
Interviewee: Yeah, I’m fascinated by, you know, internet marketing. It’s obviously the way of the future. It’s moving so incredibly fast. It’s hard to keep up with it. I could ask the question of how do you keep up with it, but I don’t think anyone could give me the answer. I think the fundamental question though, maybe is that, which is, “What’s next? And how do you capitalize on it, on the internet?
Andrew: OK. All right. Let’s put that up. And we’ll see what people think is coming up next. Well, thank you for doing this interview with me, Noah. It’s been great to meet you. And I’m going to say again, and I’ll link to our guys. Check out BusinessMensch. And I’ll link to his websites. And thanks for being here.
Interviewee: Thank you very much, Andrew. It was a pleasure to be here. Good day.
Andrew: Bye.
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[Thank you Jim McCarthy of Goldstar Events for introducing me to Noah!]
