Arrival of more chains to Colorado Springs challenges mom-and-pop places

By Rich Laden Published: December 8, 2013 | 5:35 pm 0

Colorado Springs always has been a haven for chains.

Big discount stores. Home improvement warehouses. Fast-food, fast-casual and sit-down restaurants.

One of the latest additions: regional and national bakeries. And just as McDonald's is a rival for local hamburger stands and Wal-Mart towers over smaller retailers, a growing number of chain bakeries are presenting new challenges to familiar mom-and-pop storefronts.

St. Louis-based Panera Bread, whose locations are corporate-owned and franchised, has had a handful of stores in the Springs for years, but others have recently entered the market. In October, Utah-based Kneaders Bakery & Cafe opened its first location, at the First & Main Town Center near Powers Boulevard and North Carefree Circle.

Nothing Bundt Cakes, which started in Las Vegas, also opened in October at University Village Colorado, northwest of Nevada Avenue and Garden of the Gods Road.

Kneaders and Nothing Bundt Cakes aren't necessarily corporate giants - the kind of companies where out-of-town executives send marching orders to on-site employees. Kneaders, opened by Utah franchisee Four Foods Group, has a local general manager who's also a part owner.

The Nothing Bundt Cakes location is a franchise, but it's run by husband and wife Rick and Regina Cihak of the Springs, their daughter, Alyssa Cihak Lopez, and other family members.

Still, Kneaders, Nothing Bundt Cakes and existing Panera stores could create stiff competition for local bakeries. They have regional and national name recognition and potentially greater resources to market themselves. And in an industry where profit margins are small and overhead costs can fluctuate wildly, every advantage helps.

"It is an incredibly competitive market at all different levels, from everything from the small mom-and-pop retail bakery all the way right up to the multibillion, multistate national branded companies," said Robb MacKie, president and CEO of the American Bakers Association, a Washington, D.C.-based baking industry trade group. It's an industry where profits are perhaps 2 percent to 3 percent - maybe 4 percent to 5 percent in a good year, he said.

"You're not selling iPads and iPods and all that kind of stuff," MacKie said. "I can only guess what their mark-up is."

Prices for flour, eggs, wheat and other ingredients skyrocketed during the recession, although they've since stabilized, MacKie said. Government regulations on food safety and other operations create additional burdens for bakers, he said. And customers have expectations on the quality and freshness of baked goods, which have a short shelf life.

"You're just constantly making products," MacKie said.

And yet, it's a business where, despite the competition and long hours that involve getting up well before dawn, bakers have a deep passion for what they do, he said.

Getting back in business

Pat Penrod is a local CPA and 30-year resident but also owned two bakeries years ago when she lived in Ohio. After three years of thinking about getting back into the baking business, she opened My Granny's Kitchen on Oct. 1 in a shopping center east of the SuperTarget at Powers and North Carefree - and just north of First & Main Kneaders location.

"I decided it was time to get back to doing something I really enjoy," she said.

Penrod said she knows there's competition from larger bakeries, such as Kneaders, although she said she didn't know the chain was on its way when she decided to open her store. But Penrod said her store will rely on quality products, creating customized cakes and other items and providing great customer service, which MacKie said is critical for mom-and-pops as they confront larger rivals.

"That one-on-one relationship, they can't get it with the chain," Penrod said. "They can talk to the owner, express what they want with any concerns about something."

Stephen Boonzaaijer, co-owner of Boonzaaijer's Dutch Bakery, started his Springs bakery in 1999. A fifth-generation baker, Boonzaaijer recently moved his bakery to a larger building at 610 E. Fillmore St. from its longtime home on Centennial Boulevard.

Boonzaaijer said he doesn't pay too much attention to the large chains moving into town. He said he believes he has a loyal following, and he has seen strong sales growth over the past two years.

"A chain operation, in order to achieve a consistency, they have a tendency to sacrifice on quality to get a standardized product," he said.

"Sure, people are going to shop there and they're probably going to try it," Boonzaaijer said of the chains. "But hopefully, we try to offer a product that is unique and has a level of quality that they're not going to find at other places."

In fact, that's part of what local bakeries such as his have to remember: Do what you do best, Boonzaaijer said, and don't try to copy your rivals.

"I realize where our strengths are," he said. "I don't want to get into product lines that are easy to compete with. The more you can stay unique, I think the better off you are as a smaller operator."

At the same time, some chains can raise the bar on service and consistency. Their customers develop expectations that they'll get the same type and taste of product every time they walk in the door. That, in turn, forces smaller operators to take stock and make sure they're offering the same quality products for their customers, Boonzaaijer said.

"With the chains, people develop an expectation that every time they purchase a product, they expect the exact same culinary sensation," he said. "I think smaller operators really need to be careful to step up the consistency of their product."

Setting yourself apart

Although they're part of a chain, the Nothing Bundt Cakes franchisees feel they're, in effect, mom-and-pop operators, Alyssa Cihak Lopez said.

"We're natives of Colorado Springs; we've been here for a long time," Cihak Lopez said.

And unlike Kneaders and Panera, which offer many types of products, Nothing Bundt Cakes is a specialty baker, as the store name says. It offers different styles and sizes of Bundt cakes, and all of the items are baked on-site with fresh ingredients, which sets it apart from some chains, she said. Places such as Starbucks sell baked goods that were made elsewhere and trucked into the store, Cihak Lopez said.

"We live in a world where everything is prepackaged and with preservatives," she said. "We strive for quality ingredients and products. That's why we do just one product."

Cihak Lopez said a second location would be a long-term dream for her family. For now, they're happy with the single store, and business has been strong. They were especially busy at Thanksgiving.

"We want people to feel like when they're coming in here and they're buying a cake for someone, they're doing something special."

Head-to-head competition

Although Kneaders also is part of a chain, its franchisee rejects the idea that it's a corporate giant that has come to town to bury competitors.

Andrew Smith, CEO of franchisee Four Food Groups, said Kneaders competes head-on with Panera. But he said he embraces local mom-and-pops and other Springs restaurants that specialize in baked goods.

"When they walk out of our store, I don't want them to not go across the street the next day and eat at Marigold's restaurant," Smith said. "Go eat there. You can't eat at my restaurant every day, anyway."

Smith said he's looking at a site for a second store in the Springs but isn't yet sure if he'll locate there because it's around the corner from a well-known bakery caf? The two have differences, Smith said, but locating a second Kneaders nearby would hurt the bakery caf?s business and probably hurt his own operation, too.

"They create the market, they pave the way, they deserve to stay in business with us," Smith said, in deference to local bakeries.

At the same time, Smith said, he wants to locate his stores in areas where they will play off the traffic generated by other retailers, and vice versa. That way, everybody benefits, he said. Smith also rejects the idea that a chain means a corporate mindset.

Employee training, the restaurant d?or and even overhead music are designed to evoke a feeling of family, he said. And because his general manager is a part owner, customers will be heard if they have a concern or a special request.

"This is not a corporate beast," Smith said. "I have owner-partners in the store. You can talk to us just the same as the locals in Colorado Springs."

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Contact Rich Laden: 636-0228

Twitter @richladen

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