A well-rounded business
March 30, 2015
A year ago, Sean Cary and Anton Novak were looking for a commercial kitchen to produce a new line of gluten-free pizza crust when they stumbled on something much bigger.
With negotiations for one location bogging down, Cary took a quick look at Craig's List and found a bakery for sale. Rounds Bakery had already closed one location and was days from closing the doors on its last store for good.
Within two weeks, new owners Cary and Novak began transforming the struggling donut and bagel bakery, located at 294 E. Moana Lane, in Reno, into a successful business. In the past year, Rounds Bakery has grown its retail revenue by 40 percent and wholesale by 20 percent.
The previous owners tried to save it by shrinking, said Novak during a break following the morning rush.
Cary and Novak took the opposite approach, improving existing recipes, adding products, opening new markets and bolstering employee benefits.
"We changed literally everything," he said.
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A former operation major in the Air Force, Novak began by rearranging the 6,000-square-foot production kitchen floor plan to reduce the steps needed to complete a task and swapping the production schedules of the donuts and bagels.
Previously, the bakery produced donuts first each night, he said. However, donuts have a shorter shelf life. Plus bagels need to be cooled before packaging. It made more sense to make bagels first.
The partners also consider giving back to the community an essential part of their business plan.
"Growing revenue (by giving back) happened by accident," he said.
When an employee began throwing donuts away at the end of the day, the standard practice under the previous owner, Cary stopped the practice and took the leftovers to a homeless shelter.
"You wouldn't think that would translate into revenue," Novak said, but it did.
Not long after donating surplus donuts to the shelter became standard practice, a man in tattered clothes came in and began counting his change for a donut. He said he had first tried Rounds' donuts at the homeless shelter and loved them.
Rounds' employees and customers also get involved in giving back to the community by donating tips to various charities, which the bakery matches.
Online and at the store, customers are notified that on certain days tip money will be donated to a specific organization. Customers respond generously, including with the occasional $100 bill.
"We donated $1,400 to Operation Backpack with two days of tips and matching," Novak said, of the organization that puts together back-to-school supplies in new backpacks for youths in the area. "We seem to break $1,000 (in donations) no matter what."
Other beneficiaries have included The Discovery children's museum and Veterans Guest House.
Before Cary and Novak asked their employees to give up tips for charities, they made sure the employees were taken care of.
"I can't expect (the employees) to be ambassadors of a fine product without them feeling acknowledged," Novak said.
Rounds' 17 employees receive above minimum wage, plus health benefits and even 401k plans with company matching.
Beyond the foundation of taking care of employees and community, Cary and Novak also made major changes in Rounds' products and services.
Natural ingredients replaced artificial flavors and colors and that ingredient change opened up new wholesale revenue sources at stores that specialize in natural foods.
New products, such as the Fat Bastard donuts and #NotACronut (croissant-donut hybrid that can't be called a "cronut" because the name is copyrighted by a New York bakery), as well as specialty breads for the Jewish community, opened up additional revenue streams.
"Because we're a from-scratch bakery, customers can tell us that they want something and we just open up a recipe book," Novak said.
Rounds also rents kitchen space to start-up companies, providing yet another revenue stream.
"It's kind of fun; the exchange of ideas and knowledge," he said. "I get to learn about their businesses and they learn about ours."
Finally, a few weeks ago, Novak and Cary began producing the gluten-free pizza crust they originally went into business to make.
"We had iceberg-sized holes gushing cash. We needed to plug those first," Novak said.
For now, the gluten-free products cannot be certified safe for those with celiac disease because Rounds does not have a dedicated gluten-free kitchen. Plans are in the works to remodel a section of the kitchen to comply with those standards.
What they do offer is a product for those who want to eat healthier by avoiding gluten.
And what they get is another revenue stream to add to the success of Rounds.