Speaker 1: Frank Craale made a decent living as a tech guy
Speaker 1: in California, but he and his wife craved a sweet
Speaker 1: life in a small town, so they pack up and
Speaker 1: opened the Rocky Mountain Chocolate Factory in Colorado. And the
Speaker 1: early days of this company's history were tempered with bitter sweetness.
Speaker 1: Despite positive strides, a combination of under capitalization and a
Speaker 1: lack of no how meant this company spent many years
Speaker 1: just struggling to stay afloat. How did Frank prove that
Speaker 1: the candy man can Let's find out? This is Rocky
Speaker 1: Mountain Chocolate Factory on the brink. Hey everybody, I'm Jonathan
Speaker 1: Stricklin and I'm Aerial Casting. So this is a pretty
Speaker 1: sweet subject we're covering today. Yeah, it's a candy store
Speaker 1: and one that has made some big strides and yet
Speaker 1: I never heard of it before. Yeah, it's actually one
Speaker 1: that has become one of the largest candy companies in
Speaker 1: the world. And that's saying something when you consider that
Speaker 1: it's it's relatively young compared to something like good Iva
Speaker 1: Yeah and se Sees Candies. Yeah. So we're really going
Speaker 1: to explore the story behind this because it's it's one
Speaker 1: of those. That's sort of remarkable in the sense that
Speaker 1: a lot of these stories we try to do on
Speaker 1: the brink lead up to a single big moment that
Speaker 1: you can point out and say this was the maker break.
Speaker 1: In this case, we're talking about a company that could
Speaker 1: have gone out of business for much of its early history,
Speaker 1: and only through perseverance and maybe some stubbornness, uh and
Speaker 1: perhaps not knowing any better, the company was able to succeed. So, oh,
Speaker 1: spoiler alert, this company succeeds. Yes, and you know just
Speaker 1: started off. I'll say they have an enormous fifty square
Speaker 1: foot factory now in Colorado where they started, and they
Speaker 1: started off with one tiny little candy shops. So let's
Speaker 1: kind of get into that. As we said with the introduction,
Speaker 1: it all started with Frank Krill, and he was a
Speaker 1: tech guy. Yeah he uh. We came out of San Diego, California.
Speaker 1: His mom worked in retail, his dad was working in
Speaker 1: the aerospace industry. He would buy parts. He was like
Speaker 1: a in that supply chain section for aerospace. So Craile
Speaker 1: goes to college. After college, he ends up joining the army.
Speaker 1: And this is in an era where we have the
Speaker 1: Vietnam War, he gets deployed to Okinawa and there he
Speaker 1: would work in an army intelligence unit. So for the
Speaker 1: second time, I think in the Brink storyline, we are
Speaker 1: covering a tech guy who has links with the c
Speaker 1: i A. The first time would be with Oracle And also,
Speaker 1: you know somebody who went and worked for the army
Speaker 1: and then did a complete turnaround afterwards. So he worked
Speaker 1: for the CIA when he came back from the Vietnam War.
Speaker 1: And then he launched his own company called c n
Speaker 1: I Data Processing in nineteen seventy two, and they did
Speaker 1: billing for cable companies, cable television companies, which were just
Speaker 1: starting to really become a thing in those early seventies.
Speaker 1: So he was essentially saying, well, this is going to
Speaker 1: be a big business. So what I'm gonna do is
Speaker 1: I'm going to build a company that works in the
Speaker 1: background of that industry. So this was not, you know,
Speaker 1: a consumer facing company. This was something that ran the
Speaker 1: back end system, the building system for these larger cable companies.
Speaker 1: And you know, he actually did pretty well. He was
Speaker 1: making a decent living, but he and his wife, they
Speaker 1: wanted to start a family and they wanted to raise
Speaker 1: their family in a small town. Yeah, they wanted to
Speaker 1: have sort of that idyllic Americana approach that we always
Speaker 1: think of. We associate that with like Walt Disney, who
Speaker 1: had that same sort of fascination with small town America. Yes,
Speaker 1: and and you know, opening this candy store was a
Speaker 1: part of that idyllic picture. It would turn out that way.
Speaker 1: But when he when he made this decision, like first
Speaker 1: they settled on the community, and they went about this
Speaker 1: in a way that is totally backwards from how I
Speaker 1: would do it. They started off by finding a little
Speaker 1: town they liked. It was Durango, Colorado, and they had
Speaker 1: a population reports of area between twelve thousand and fifteen
Speaker 1: thousand people at that time. So we're talking like thee
Speaker 1: at this point. Yes, So they moved there with they
Speaker 1: intend that this is where they're going to start their family,
Speaker 1: to really kind of start this new chapter of their lives.
Speaker 1: And then and only then, this crail thinking all right, well,
Speaker 1: I need to come up with some sort of business
Speaker 1: I can do while I'm here, because I'm going to
Speaker 1: end up divorcing myself, like to to leave the company
Speaker 1: I found it. Yeah, and I want to start a
Speaker 1: business that will help me get to know the other
Speaker 1: people in this town. Part of the draw of a
Speaker 1: small town is knowing all your neighbors and having that community,
Speaker 1: having that that sort of Andy Griffith show kind of
Speaker 1: relationship with everybody. Yeah, and so he got to the
Speaker 1: town and he started asking around what sort of businesses
Speaker 1: do you need? And the one thing that everybody greed
Speaker 1: on was that they needed a car walk car wash. Yeah,
Speaker 1: we're gonna have a little disco moment here in the office,
Speaker 1: but you guys just keep on going down. Yeah, we're
Speaker 1: doing our little chair dance. It's about as lane as
Speaker 1: you can imagine. So he's not exactly totally psyched about
Speaker 1: that idea. He's like, well, that might there might be
Speaker 1: a need for that, but I can't really get passionate
Speaker 1: about a car wash. And then some other guy happens
Speaker 1: to mention that there's perhaps another opportunity besides scrubbing down cars,
Speaker 1: and that would be a candy store. Now, let me
Speaker 1: just say, no matter where I moved, I'd be like,
Speaker 1: we need another candy store. Yeah, I would be one
Speaker 1: of those people who, if I lived next to a
Speaker 1: candy store, would say we need a candy store. Well,
Speaker 1: he thought, that's something I could really get behind. I
Speaker 1: like candy. Keep in mind Mr Crale was not a
Speaker 1: candy maker and had never thought of being one before. Yeah,
Speaker 1: he had never even remotely studied anything about chocolate tearing
Speaker 1: or anything like that. He had had no experience there.
Speaker 1: But he thought, this is an opportunity and Durango, Colorado
Speaker 1: is a big tourist destination. Will talk a little bit
Speaker 1: more about that in a second. So he thought, well,
Speaker 1: there is the possibility that that tourism industry could help
Speaker 1: make a business like that flourish. And at first he
Speaker 1: wasn't even thinking necessarily about making his own company. He
Speaker 1: was looking at the possibility of opening up a store
Speaker 1: that would be related to an existing candy company's chocolate season.
Speaker 1: Yes he's Candy Sez Candy, but they didn't franchise at
Speaker 1: that time. Yeah, so he couldn't just become a franchise
Speaker 1: operator because that was not an option. So instead he thought, well,
Speaker 1: I guess I'll do this myself. And at the time
Speaker 1: he was drawing about six thousand dollars per month from
Speaker 1: his interests in the company he had co founded that
Speaker 1: N and I, which was enough for him to cover
Speaker 1: his costs of living and everything, but not exactly the
Speaker 1: startup capital you would use to launch a and new business. No, no,
Speaker 1: So he also roped into fronts or he got them
Speaker 1: to invest in the company, Jim Hilton and Mark Leapinski.
Speaker 1: Hilton at least had made fudge in the past, yes,
Speaker 1: so he came with the deep expertise in gandy making.
Speaker 1: He was at least a hobbyist. And then kill also
Speaker 1: took out a second mortgage on his house. He borrowed
Speaker 1: fifty thousand dollars in capital to start his little candy store.
Speaker 1: And so he starts looking for a location. And like
Speaker 1: I said, Durango, Colorado is a big tourist destination, and
Speaker 1: part of that is because Durango is on a rail line,
Speaker 1: the Durango and Silverton narrow Gauge Railroad. So he wanted
Speaker 1: a location close to that because that would be where
Speaker 1: all the tourists were. But that also was some of
Speaker 1: the more expensive real estate in the town. So it
Speaker 1: would cost him thirty dollars to secure that location. It's
Speaker 1: over half his capital right now. Just so that you
Speaker 1: guys know what this is all about. In case you're
Speaker 1: not familiar with narrow gauge railroad. The name kind of
Speaker 1: tells you what it means. It means that the actual
Speaker 1: width of the railroad track is more narrow than what
Speaker 1: you would see as the standard. The standard, by the way,
Speaker 1: in case you're curious too, it's four ft eight and
Speaker 1: a half inches or one d thirty five millimeters, So
Speaker 1: this was more narrow than that. And you can get
Speaker 1: tickets to ride on a train on the Durango in
Speaker 1: Silverton narrow Gage Railroad. They use original equipment that dates
Speaker 1: to the late nineteenth century, so we're talking like eighteen
Speaker 1: eighties era train and you can ride on it. They
Speaker 1: even have a presidential car where you can ride in
Speaker 1: luxury or you can ride in first class or you
Speaker 1: know steerage. Essentially, you're shoveling coal into the furnace to
Speaker 1: make the train go. I exaggerate for a fact, but
Speaker 1: this is a big tourist attraction, and so we thought, well,
Speaker 1: locating my candy shop near that would mean that people
Speaker 1: who get off the train who are walking around to
Speaker 1: look at this pick shrested town are gonna see this
Speaker 1: little town candy shop and what could be more charming?
Speaker 1: And people who ride trains probably gone and want some. Yeah,
Speaker 1: I know I do. So he bought his location, but
Speaker 1: he's still in San Diego, and uh he starts looking
Speaker 1: around for things to furnish his shop with. So they
Speaker 1: get some antique scales to decorate with. They get these giant,
Speaker 1: heavy marble slabs to make fudge on. They want to
Speaker 1: make their candy live at least their fudge in front
Speaker 1: of people, to entertain folks. This is not an uncommon
Speaker 1: thing in candy stores. I know down in Savannah, Georgia,
Speaker 1: you've got the Savannah Candy Company. Oh yeah, you've got
Speaker 1: tons of little chocolate coming, like Helen, Georgia. Also, like
Speaker 1: all the little touristy towns in the area, you know,
Speaker 1: they dip their own apples and they pull their taffy,
Speaker 1: and some of them make fudge. It's very visually arresting,
Speaker 1: like you see it and you and you are fascinated.
Speaker 1: And also it just looks delicious. I mean you think
Speaker 1: about like Willy Wonka and the chocolate factory and those montages.
Speaker 1: It's that kind of thing. And also you get the
Speaker 1: smell of the cooking candy, which just makes you hungry.
Speaker 1: And you learned the process too, which can be really cool,
Speaker 1: like the fact that they use marble to help with
Speaker 1: the temperature and and the moisture of the stuff they're
Speaker 1: working with. So it was a clever idea. It was
Speaker 1: one that other candy shops had used successfully, and so
Speaker 1: it showed that Crail had been paying attention. Yes, Now,
Speaker 1: one of the other things that he bought in San
Speaker 1: Diego to bring with him was chocolates to sell. Yes,
Speaker 1: not fudge, but actually pre made chocolates, because he didn't
Speaker 1: know how to do that. Yeah, and neither did his
Speaker 1: buddy Jim, who had made fudge, he didn't know how
Speaker 1: to make chocolate. So they bought it from a guy
Speaker 1: named Everett Seeley who operated a candy store over in
Speaker 1: San Diego, and a few other suppliers like a division
Speaker 1: of Guitard Yard. I've never known how to pronounce that
Speaker 1: quick company, but I do like their chocolate. So they
Speaker 1: have moved to Durango and they're getting ready for the
Speaker 1: grand opening of their store. They had decided that they
Speaker 1: were going to open on Memorial Day in nine and
Speaker 1: they're they're they're ready to set up. They've secured the
Speaker 1: location and their buddy Jim is literally on the road
Speaker 1: driving from California to Colorado hauling marble and chocolate. What
Speaker 1: could possibly go wrong? Well, we'll tell you right after
Speaker 1: this brief moment to thank our sponsors. Okay, so we've
Speaker 1: established the locations there, the chocolate and the marble are
Speaker 1: on their way. Jim has got the secrets of fudge
Speaker 1: locked away in his head. Almost immediately, things don't quite
Speaker 1: go according to plan. No, so very first, Jim gets
Speaker 1: a flat like a flat tire, which doesn't keep him
Speaker 1: from getting to Colorado, but it does get him there late. Yes,
Speaker 1: so they were going to open Memorial Day weekend. He
Speaker 1: gets there at about nine pm local time Friday night. Yeah,
Speaker 1: and they really tough it through. They burned the midnight
Speaker 1: oil and set up shop that night. Yep. They get
Speaker 1: everything ready to go and then they turn in late
Speaker 1: late late that night, and then they oversleep. Yeah, they
Speaker 1: don't wake up quite on time to get everything ready
Speaker 1: to go for opening. Now I'll say like oversleep. I
Speaker 1: know on the weekend, I like to sleep very very
Speaker 1: late sometimes, but they overslept to walking nine am. So
Speaker 1: then they get to the store and uh, they encounter
Speaker 1: a second issue, which is that Jim, who had made
Speaker 1: fudge had never made a batch larger than six pounds
Speaker 1: in his life, and that was gonna be too little
Speaker 1: for it. For it, even for your first day, you
Speaker 1: gotta need more than six pounds of hudge. Also, he
Speaker 1: had never made fudge at an altitude of six thousand,
Speaker 1: five hundred twelve feet, which spoiler alert is the altitude
Speaker 1: of Durango, Colorado. Yes, and you know, I like to
Speaker 1: bake personally, and I like to make candy, and that
Speaker 1: altitude and humidity in the air and all that really
Speaker 1: can men see you up if you don't plan for
Speaker 1: Oh yeah, no, I am reminded of the time my
Speaker 1: dad made an incredible homemade fudge. It's been years since
Speaker 1: he's done it. Dad, if you're listening to this, make
Speaker 1: me some fudge. But I remember once when he decided
Speaker 1: to turn his fudge making skills to divinity. And if
Speaker 1: you don't know what divinity is, folks, you've got to
Speaker 1: come down to the southeast. Well, we'll treat you. But
Speaker 1: his divinity did not take into account the temperature and humidity,
Speaker 1: and we ended up with divinity flavored hockey pucks. They
Speaker 1: were like little frisbees. Now, to make fudge at a
Speaker 1: high altitude. This is something that Jim would learn through
Speaker 1: bitter experience, might be sweet experience, because it was fudge.
Speaker 1: You have to decrease the amount of time you actually
Speaker 1: cook the fudge because liquid will evaporate off of your
Speaker 1: cooking mixture much more quickly at higher altitudes than they
Speaker 1: would at sea level. So general rule of thumb for
Speaker 1: all you prospective fudge makers out there is that you
Speaker 1: should deduct two degrees from your cooking temperature. We're talking
Speaker 1: fahrenheit here for every one thousand feet of elevation. So
Speaker 1: since they were at more than six thousand feet, they
Speaker 1: should have deducted about twelve degrees from their cooking temperature.
Speaker 1: But Jim didn't know that at the beginning of it. However,
Speaker 1: he figured it out eventually, and he cooked up a
Speaker 1: batch of a twenty two pound batch of fudge. Yeah,
Speaker 1: and they made a lot of flavors to that first weekend,
Speaker 1: and you know, despite all these little hiccups, they had
Speaker 1: a really good opening weekend. They sold out of fudge.
Speaker 1: They made eight hundred and fifty dollars the first day,
Speaker 1: and the second day was about as good, maybe a
Speaker 1: little bit better, because they remembered to bring the chocolate. Yeah,
Speaker 1: that was the other big problem. They had left the
Speaker 1: chocolate behind on opening day. Yeah. Yeah, it's a good thing.
Speaker 1: They had fudge and carmel apples and things like that.
Speaker 1: They also got a request from some customers they said, hey,
Speaker 1: do you do mail orders and crails like yeah, they
Speaker 1: hadn't even thought about it yet, know, And it would
Speaker 1: actually take them a little bit of time to test
Speaker 1: a mail order catalog. Oh yeah, no, that the actual
Speaker 1: cattle log would take several years before they would launch
Speaker 1: one of those. But they rapidly followed a philosophy and
Speaker 1: this would stay true for much of the history of
Speaker 1: the company of let's say yes and then yeah. And
Speaker 1: you know, there are a lot of companies that do
Speaker 1: this to varying success, but it really it really speaks
Speaker 1: to craal tenacity. Then they had this other problem where
Speaker 1: they didn't have good cold transportation to bring this chocolate
Speaker 1: over from California. They didn't have refrigerated trucks yet. No,
Speaker 1: and you know, I don't think Jim was going to
Speaker 1: constantly make that trip back and forth. Yeah, So they
Speaker 1: realized they were going to need to start making chocolate
Speaker 1: on the premises, So they reached out to Everett Seeley,
Speaker 1: the same man that they had bought the chocolate from.
Speaker 1: Now he at this point was entering into retirement, and
Speaker 1: they said, could you teach us? Oh, why is chocolate tear?
Speaker 1: And he said, yes, grasshopper. So they set up shop
Speaker 1: and the most logical of places on top of a
Speaker 1: ping pong table. Yeah, that's weird. I mean if you
Speaker 1: make if you make a ruffle and it bounces, doesn't
Speaker 1: that mean it's fresh? I guess. So this was also
Speaker 1: when Kraill would have another mistake that would help define
Speaker 1: the company. This is also another interesting thing about this
Speaker 1: particular company is that it's a company that was defined
Speaker 1: by mistakes, but not in a bad way, like it
Speaker 1: was stuff that would end up kind of differentiating the
Speaker 1: company from other companies. I mean, it did have some
Speaker 1: negative impacts financially, but yeah, from a consumers standpoint, people
Speaker 1: loved it. And the thing we're talking about here is
Speaker 1: where Kraill had decided he's going to make some well
Speaker 1: we would call him turtles, but they call him bears
Speaker 1: in the Rocky Mountains speak. And it is a mixture
Speaker 1: of caramel and pecans, or caramel and pecans. If you
Speaker 1: prefer that's then dipped in chocolate. But the problem was
Speaker 1: the caramel and pecan clusters that Kraill had made were
Speaker 1: about five times bigger than what they needed to be. Yes,
Speaker 1: way way too big. But they did not trash them. No,
Speaker 1: they dipped them in chocolate and sold them and people
Speaker 1: loved them. Yeah. I mean, come on, you're you're like, oh, candy,
Speaker 1: that's five times the size of normal candy. I would
Speaker 1: also love that, you know. And people loved watching them
Speaker 1: mess up and figure out how to fix their mistakes.
Speaker 1: So they'd be in store making their candies and they
Speaker 1: make the core too big, and then they dip it
Speaker 1: and wouldn't look right again, so they dip it again,
Speaker 1: and there these candies became massive. And they had one
Speaker 1: peanut butter cup they made that was big enough that
Speaker 1: it got nicknamed the bucket. Yeah, so I want to
Speaker 1: eat that. This actually reminds me of of experiences I've
Speaker 1: had where I've gone into like locally run businesses where
Speaker 1: the people running the business are very sincere. Sometimes things
Speaker 1: are not going exactly as planned, but it does come
Speaker 1: across as more charming because they don't let that derail them.
Speaker 1: They don't deny that there's an issue. They just they
Speaker 1: either embrace the failure and incorporated in some way or
Speaker 1: otherwise make you feel like you can kind of trust
Speaker 1: these people because they're they're not hiding away things right,
Speaker 1: And I find that very endearing, and it sounds like
Speaker 1: the people of Durango, Colorado and the tourists who are
Speaker 1: visiting also did so. Their first year they made a
Speaker 1: hundred and eighty thousand dollars, which sounds like a lot,
Speaker 1: but you've got to remember that they had spent a
Speaker 1: good deal of money, in fact, more than their starting
Speaker 1: investment capital, just getting things running that first year, the
Speaker 1: third k on the on the lease, and then all
Speaker 1: of their supplies, all of their equipments and all of
Speaker 1: their resupplies as well, So the company spent quite a
Speaker 1: few years just trying to make up that loss. Also,
Speaker 1: in nine two, just after they had launched, it became
Speaker 1: clear that while this was a true passion project for
Speaker 1: Frank Crayle, the same could not be said for Jim
Speaker 1: and Mark, his co investors, who helped launch the company
Speaker 1: back in the end of one so they both wanted
Speaker 1: out and Frank bought their shares of the company. Yes. Now,
Speaker 1: Frank also would open up some additional stores. After the
Speaker 1: success of his first one, he expanded out so that
Speaker 1: he owned four stores. It was an owned and operated business.
Speaker 1: And then he made another big decision that ultimately would
Speaker 1: affect the success of his company. He decided he was
Speaker 1: going to franchise. He wasn't going to be like Sees Candy.
Speaker 1: And so the problem was, like many of the other
Speaker 1: incidents we've talked about before, he didn't have any experience
Speaker 1: in this. He didn't have any working knowledge of how
Speaker 1: this would work, or even an infrastructure to support it.
Speaker 1: But he said, this is what I want to do,
Speaker 1: so he plunged into it. Now he had a hope
Speaker 1: that by opening up more stores, if he can make
Speaker 1: them as successful as his first stores primary store, he
Speaker 1: would make enough money to overcome the costs of operating
Speaker 1: the business. Yeah, because then you can buy in bulk
Speaker 1: a little bit more um and split that supply cost
Speaker 1: between multiple locations that are all bringing in hopefully the
Speaker 1: same amount of revenue. Yeah. So this was this was
Speaker 1: a big gamble because could have just as easily been
Speaker 1: that each of those stores would have just added to
Speaker 1: the cost of operation. Yeah, or that they if they
Speaker 1: were too close, they just split their customers. Right, Yeah,
Speaker 1: you end up not getting as much revenue because people
Speaker 1: just are choosing one store or the other. But you're not.
Speaker 1: You're not you're not effectively doubling or tripling your revenue
Speaker 1: anymore because you've you've diluted it. Yeah, this was a
Speaker 1: pretty big risk, and it was one that did not
Speaker 1: immediately pay off either, so that also made it even scarier. Right, Like,
Speaker 1: it could have been a situation where because it was
Speaker 1: taking a long time to kind of get on solid
Speaker 1: financial ground, you could have seen this candy empire melt away.
Speaker 1: Clever Jonathan, I was gonna say cookie crumbles, but that
Speaker 1: doesn't really work well. Kraale was, you know, thinking of
Speaker 1: the bruttalness of all of this situation. Okay, okay, I
Speaker 1: see where you're going. Because he spent nights up wondering
Speaker 1: if he could pay his employees for the week, he
Speaker 1: had to contact their suppliers saying, hey, we can't pay
Speaker 1: this invoice. Thankfully, a lot of people were really understanding
Speaker 1: and worked with him, which is I wouldn't say the
Speaker 1: norm no to me. It is pretty remarkable that he
Speaker 1: would talk to these suppliers, and they seemed very understanding
Speaker 1: and would offer him extensions on paying back his debts.
Speaker 1: He was also having trouble even though he was expanding
Speaker 1: his business, he was having trouble with that as well
Speaker 1: because he didn't have a whole lot of money, so
Speaker 1: it was difficult to attract people to run the businesses
Speaker 1: who had experience both in the candy industry and just
Speaker 1: running a business in general. He was having trouble getting
Speaker 1: the talent he needed, so he faced a lot of
Speaker 1: different challenges at that moment. Even so, while he's facing
Speaker 1: all these challenges, he's still maybe by force of will alone,
Speaker 1: making this company grow to the point in six he's
Speaker 1: ready to bring it public and to have an I
Speaker 1: p O on the Nasdaq. Yeah, and it took sixteen
Speaker 1: years from that point for them to be financially sound. Yeah,
Speaker 1: you're talking about two decades of being in business before
Speaker 1: they were able to say, oh, we've paid off our
Speaker 1: debt the first time. And you see this all the
Speaker 1: time with like restaurants where people love this restaurant, but
Speaker 1: they just don't make enough money to stay afloat and
Speaker 1: they close and then you're really sad. The cost of
Speaker 1: operation is just too high sometimes, Yeah, and thankfully this
Speaker 1: was not the case for the Rocky Mountain Chocolate Factory.
Speaker 1: But when they went public that same year, they had
Speaker 1: a revenue around four point one million dollars that year,
Speaker 1: but they also had a net loss of a hundred
Speaker 1: and forty six thousand, seven hundred and six dollars. Yeah,
Speaker 1: that was not not great. And the next year they
Speaker 1: were seeing a rise in revenue, but the losses were
Speaker 1: increasing even more. So this is where you start really
Speaker 1: getting into that feeling that you're in quicksand it was
Speaker 1: up to one point million, and the company had fifty
Speaker 1: five stores in thirteen states. Yeah, he had expanded quite
Speaker 1: a bit, but again the cost of operations were outpacing
Speaker 1: the revenues, so in he didn't have much choice but
Speaker 1: to close some of those stores, right, like ten of them.
Speaker 1: And that was also the year that they would first
Speaker 1: test out a male order catalog for the Christmas season,
Speaker 1: so about nine years after they opened. And then that
Speaker 1: helped a bit, right, so they were able to get
Speaker 1: things to turn around. They were able to get a
Speaker 1: positive revenue source coming in where they're starting to make profit,
Speaker 1: and part of that was helped by the fact that
Speaker 1: by franchising, they could charge franchise fees. So people who
Speaker 1: wanted to run a Rocky Mountain chocolate company out of
Speaker 1: their town would pay this franchise fee and in return
Speaker 1: they would be allowed to use the name and the recipes,
Speaker 1: and which is of course, that's how franchising just tends
Speaker 1: to work in general. And it was only at this
Speaker 1: point that the franchising structure was starting to really pay off,
Speaker 1: where those franchise fees were helping make up some of
Speaker 1: the ground of operating a business that has a very
Speaker 1: high cost. They're making revenues of about a hundred and
Speaker 1: eighty seven million dollars a year. They had a hundred
Speaker 1: and sixty two stores, and Frank was buying less for
Speaker 1: stores to franchise faster than he could franchise them out.
Speaker 1: He ended up running a lot of them himself. They
Speaker 1: were I think forty five company owned at that time,
Speaker 1: and he was trying to launch a chain of hard
Speaker 1: candy stores at the time too, called Fuzzy Wigs, which
Speaker 1: I think I've heard of. Fuzzy Wigs. Well, I keep
Speaker 1: on thinking I've heard of that, except for the fact
Speaker 1: that that's very similar to the name fezzy Wig, which
Speaker 1: is from Yeah, you've been in multiple productions of Christiness Carol,
Speaker 1: multiple have you ever been business Fezi Wig? Well, there
Speaker 1: you go. Yeah, So again, Frank did not have the
Speaker 1: infrastructure to support a hard candy business, so much like
Speaker 1: Mr Cratchett, but very much, very much in keeping with
Speaker 1: his m O up to that point. In seven, the
Speaker 1: company had to undergo a total restructure, and Frank did
Speaker 1: something very smart. He reached out and he managed to
Speaker 1: get someone who had experienced as a chief financial officer
Speaker 1: to help really get this company under control. Yes, they
Speaker 1: closed more stores that weren't turning a profit, They sold
Speaker 1: some of their company owned stores as franchises to franchise Ease,
Speaker 1: and he sold off his Fuzzy Weig chain. So it
Speaker 1: wasn't very long lasting. He was like, I don't have
Speaker 1: the support structure for this hard candy store. This might
Speaker 1: have been fighting off more than you can choose. Yeah,
Speaker 1: it was not an everlasting gob stopper, that's for sure.
Speaker 1: So then in another company came up and offered the
Speaker 1: possibility of an acquisition. Yeah, Whitman's tried to buy Rocky
Speaker 1: Mountain Chocolate Factory for sixteen million dollars, which is pretty good. Yeah.
Speaker 1: I mean that's especially when you sit there and think
Speaker 1: this all started with launching a tiny little candy shop
Speaker 1: in a relatively small town, and I could have seen
Speaker 1: being like, you know, I wanted to open this candy store.
Speaker 1: I wanted it to be easy and fun, and it's
Speaker 1: just been trial and tribulation after trial and tribulation. I've
Speaker 1: been I've been chasing making enough money to cover the
Speaker 1: costs of operating for so long. But that restruct ring
Speaker 1: had been really effective, and Kraille was thinking, I should
Speaker 1: really see where this is going. I should really because
Speaker 1: I think we're on a new path now. And so
Speaker 1: ultimately he decided to turn down the offer and we'll
Speaker 1: learn about what happened next after we come back from
Speaker 1: this quick break to thank our sponsor. All right, So
Speaker 1: now things start to turn around and get a little
Speaker 1: bit better. It's still going to take a few years
Speaker 1: to really get rolling. But in two thousand one they
Speaker 1: got themselves a new logo and they started really pushing
Speaker 1: the sale of their product for gifts. Hey, you want
Speaker 1: to buy our chocolate for Valentine's Day, for Easter, Christmas,
Speaker 1: for Birthday, for anniversaries. Yeah, they also added sugar free
Speaker 1: candies to the retinue. They modernize their stores. They like
Speaker 1: to sell a lot of chocolates that were old fashioned
Speaker 1: in an old fashioned packaging, because there's a nostalgia that
Speaker 1: people like with that, right, and it's associated with that
Speaker 1: whole mystique of being that small town and and and
Speaker 1: classic Americana. But now they're trying to appeal to a
Speaker 1: broader market, and so as part of that, they also
Speaker 1: start selling their chocolates in other stores like Feo Schwartz
Speaker 1: and Costco Costco as well. Right, And they also began
Speaker 1: to design a way where they could have a presence
Speaker 1: in shopping malls without having to pay a huge amount
Speaker 1: to have a storefront there. Yes, they came up with
Speaker 1: a tiny little kiosk that was a quarter of the
Speaker 1: square footage of their normal footprint. Right. And obviously that
Speaker 1: meant that you were limiting things that made the store
Speaker 1: is so charming, like you know, watching people hand dip
Speaker 1: candy apples and that kind of stuff. But at the
Speaker 1: same time, it allowed them to get a an entry
Speaker 1: point in like high end shopping malls that otherwise would
Speaker 1: have been prohibitively expensive. To have a space there, and
Speaker 1: by this time their revenues are up to nineteen point
Speaker 1: four million in January of two thou three. It's kind
Speaker 1: of when they really took off. The stocks started steadily
Speaker 1: growing and did for two years. They hit their highest
Speaker 1: mark in July of two thousand five. They also were
Speaker 1: able to finally pay off their debt, at least up
Speaker 1: to that point. Yeah, it'll happen again, don't worry. But
Speaker 1: but in two thousand and five, I mean, like considering
Speaker 1: that this was a company that had been sort of
Speaker 1: chasing that goal since it was started, essentially because the
Speaker 1: startup costs were so high and Crail had to borrow
Speaker 1: so much money on his own account in order to
Speaker 1: be able to launch it. To finally get to the
Speaker 1: point where the debt was paid must have been a
Speaker 1: huge moment within the company. Yeah, and their stock prices
Speaker 1: have dropped a little bit since then. It's not as
Speaker 1: strong as it was in two thousand five, but it
Speaker 1: is doubly as strong as it was before then, back
Speaker 1: when they first some public. So two thousand seven, they
Speaker 1: became the largest chocolate retailer in the United States based
Speaker 1: on locations, beating out companies like Season Geniva. Fun fact,
Speaker 1: they also beat out Season Godiva in a blind taste test. Yes,
Speaker 1: it was one of those things that the company touted forever,
Speaker 1: was that when people were looking for a chocolate that
Speaker 1: tasted rich and natural, There's was the brand that got
Speaker 1: the highest marks in a blind taste test. So they
Speaker 1: were very happy about that. Also in two thousand seven,
Speaker 1: they made number eighty on the four Small Business List,
Speaker 1: which doesn't seem that high of a number, but there
Speaker 1: are so many small businesses out there, like, yeah, when
Speaker 1: you think about just a sheer number of small businesses,
Speaker 1: it actually is pretty pretty impressive. And they were able
Speaker 1: to pay out annual dividends of forty cents to share
Speaker 1: their stocks, and they began to really find people who
Speaker 1: were serious about making the candy store business a primary business, right,
Speaker 1: not not just oh I think it would be charming
Speaker 1: to have a chocolate shop, yeah, which you know a
Speaker 1: lot of people still do. There are a lot of
Speaker 1: hobbyists in the baking and candy and food industry. When
Speaker 1: you have to buy in for a quarter million, it's
Speaker 1: going to be more than the hobby unless you're just
Speaker 1: like super duper rich. And they grew internationally successful. So
Speaker 1: they had franchises in Canada, the Philippines, South Korea, and
Speaker 1: the United Arab Emirates. They still do, and they entered
Speaker 1: an agreement in two thousand twelve to open stores in
Speaker 1: Japan as well. Yes, and that agreement was it's pretty
Speaker 1: intense because Japan had to open ten stores a year
Speaker 1: for ten years the agreement. That's a lot. They today
Speaker 1: produce more than three different types of candies based off
Speaker 1: their own recipes, so it's not like it's you know,
Speaker 1: some like generic thing. Yeah, they're all very specific to
Speaker 1: the company, and they still make in their individual stores.
Speaker 1: They still make candy live. Now it's time to talk
Speaker 1: about some decisions that also lead to more debt. Yes,
Speaker 1: and this is one that really gets my head scratching,
Speaker 1: and a little bit less transparency too. So so let's
Speaker 1: say I remember the initial frozen yogurt boom that happened
Speaker 1: in like the late eighties early nineties CEPU, and there
Speaker 1: was another one that happened not too long ago, to
Speaker 1: the point where so there's a there's a place near
Speaker 1: Atlanta called Decatur, Georgia. Decatur, Georgia, it's sort of has
Speaker 1: a small town feeling even though it's still within the
Speaker 1: perimeter of two eight five, which a lot of people
Speaker 1: say anything inside two eighty five is essentially Atlanta. I mean,
Speaker 1: i'd say Decatur is pretty bustling, but it's still, you know,
Speaker 1: it still has sort of a small town feel. And
Speaker 1: yet that's a place where at one point I think
Speaker 1: they had three or maybe four frozen yogurt places. So
Speaker 1: in ten they launched an Aspen Leaf Yogurt LLC As
Speaker 1: a subsidiary company, and then that would end up being
Speaker 1: supplemented when they acquired the assets of a company called
Speaker 1: Yogurt teeny International in and then they used the combined
Speaker 1: assets of both of those to get a majority share
Speaker 1: in a company called you Swirl. They got a six
Speaker 1: share of the equity of Use World through leveraging these assets,
Speaker 1: making them the majority owners. And again this was an
Speaker 1: attempt to kind of diversify grow the business, kind of
Speaker 1: like the hard candies fuzzy wig thing was a few
Speaker 1: years before. Because Krall really thought that the frozen yogurt
Speaker 1: markets it's very fragmented, all these independent little owners and
Speaker 1: franchises and things like that, and he thought by combining
Speaker 1: those you could strengthen their business, and you could cut
Speaker 1: costs because now you're buying products and bulk and things
Speaker 1: like that. They kept on going by acquiring a couple
Speaker 1: of other companies like Yogli, Mowgli, and cherry Berry. There's
Speaker 1: cherry Berry litigation as well. I read about that in
Speaker 1: a recent shareholder call that happened with the Rocky Mountain.
Speaker 1: But all of these decisions ended up making kind of
Speaker 1: a draining effect on the overall company. The hope at
Speaker 1: one point was that they would create a new corporate
Speaker 1: structure where all the frozen yogurt stuff would be lumped
Speaker 1: in along with their chalk glit business, so that the
Speaker 1: weaknesses of the frozen yogurt would somewhat be kind of
Speaker 1: masked by the success of the chocolate. Yes, and that
Speaker 1: was not a very popular idea. It got voted down
Speaker 1: by the shareholders. People like transparency. Yeah, they didn't want
Speaker 1: to see a company where they see the profits dropping.
Speaker 1: And the reason the profits are dropping are not because
Speaker 1: the sales are doing more poorly, but that the losses
Speaker 1: from the frozen yogurt side of the business, we're being
Speaker 1: offset by the success of the chocolate side. I mean.
Speaker 1: But that being said, Kraill pushed his way through to
Speaker 1: success with his chocolate stores, so maybe he's on the
Speaker 1: right path for frozen yogurt as well. Yeah, by seen
Speaker 1: that were able to pay off a lot of that
Speaker 1: debt that wasn't incurred as a result of making these acquisitions, right,
Speaker 1: So that was looking good. Has been a little bit
Speaker 1: more of a rough year. They've seen a bit of
Speaker 1: a slide. Nothing can of stropha. Now. They're still looking
Speaker 1: like they'll be profitable this year. It's just that it's
Speaker 1: it's a lower profit than the previous year. And generally speaking,
Speaker 1: obviously we like to see growth year over year, but
Speaker 1: that is the general story. Yes, However, we have some
Speaker 1: fun facts. One that I definitely want to mention, so
Speaker 1: we talked about bears. That is not the biggest monster
Speaker 1: this company has ever made. In for the San Francisco Zoo,
Speaker 1: they made a special commission which was a seven foot
Speaker 1: long chocolate alligator that weighed four hundred thirty pounds. It
Speaker 1: was estimated to be more than a million calories, so
Speaker 1: cast it was worth six thousand dollars. A six thousand
Speaker 1: dollars seven foot long chocolate alligator. It's such a waste.
Speaker 1: It is such a waste. Now you could you could
Speaker 1: buy your own chocolate alligator, but it was a fraction
Speaker 1: of the size. Yeah, well you wouldn't be able to
Speaker 1: eat through an alligator that big before the chocolate went
Speaker 1: all spotty and bads. Than like like that ste kind
Speaker 1: of chocolate that that was sort of like chocolate dust
Speaker 1: that appears until it turned into chalk. Yeah, so that
Speaker 1: would be the largest chocolate that I could find, Like,
Speaker 1: you know, for a company that was famous for making
Speaker 1: oversized chocolates, I think even that is saying something. Also,
Speaker 1: another fun fact is that they made a cereal with Kellogg's. Yes,
Speaker 1: that is very similar to the chocolate e special Case
Speaker 1: cereal you can get now. I didn't know there was
Speaker 1: a chocolate special case cereal. There is sorry spelling my doom.
Speaker 1: But yeah, they partnered up in two thirteen. I think
Speaker 1: they had this cereal that actually people liked pretty well.
Speaker 1: Now I tried to see if I could buy it
Speaker 1: online and bring them into the studio with me. Oh
Speaker 1: my gosh, we should be thankful because all you would
Speaker 1: be hearing in this podcast is just crunching mouth sounds.
Speaker 1: It would be like the worst a s MR ever made.
Speaker 1: Talking about my mouthful. Anyhow, I couldn't find it. That's
Speaker 1: not to say it's not still out there somewhere, I
Speaker 1: just couldn't find it. Yeah. Well, well, so we were
Speaker 1: located pretty far from the home base of this company.
Speaker 1: So I think it's time for us to sign off
Speaker 1: and perhaps go downstairs in Pont City Market where we
Speaker 1: can go to the candy store that we have a
Speaker 1: candy store in here. I'm awful hungry now because I
Speaker 1: am craving chocolate like nobody's business. So we hope you
Speaker 1: enjoyed this episode and we look forward to talking to
Speaker 1: you again soon. Until next time, I'm Jonathan Strickland and
Speaker 1: I'm Ariel Casting. Goodbye. If you would like to learn
Speaker 1: more about what we've talked about, as well as keep
Speaker 1: track of all of our episodes, make sure you visit
Speaker 1: our website at the Brink Podcast dot show, or you
Speaker 1: can email us at Feedback at the Brink Podcast dot show.