Tate's Bake Shop: Kathleen King (2019)

Hey, everyone. So the cookie brand that we are featuring on today's episode Is something that today you can find just about Anywhere, food stores, pharmacies, liquor stores, gas stations, bedbath and beyond. But back when it began, there was only one place you could buy one of those trademark Crispy chocolate chip cookies.

That was a little farm stand on Long Island. And the story of how Tate's cookies got from there to here. It's pretty extraordinary. We first told it about two years ago, but I promise you, if you haven't heard it, it's worth a listen, and even if you have, it's worth another listen. So Enjoy. They had driven my

business$600,000 into debt, I realized even though I was fired and had no job, I was responsible for one third of that debt. And all the money that the company had was gone. And I had to fight them. I had to be Get free of them.

I had to get my My business back. From NPR, it's how I built this. A show about innovators, entrepreneurs, idealists, and the stories behind the movements.

They go. I'm Guy Roz, and on today's show, how Kathle King started out selling cookies from her family's farm stand for 59 cents a bag. And spent the next four decades building a brand that eventually sold. For half a billion dollars. It's hard for me to think of a more simple and elegant enterprise than a lemonade stand. It's kinda like a laboratory where you can test out a whole bunch of hypotheses around marketing and price structure and

human psychology. Take, for example, the experience of my own children. Their first lemonade stand was just lemonade. A dollar a glass and it did fine. They made about 40 bucks. The second lemonade stand sold lemonade and freshly baked cookies. Two dollars for a lemonade and a cookie. And that did better. They cleared about$75. But the third stand had the lemonade and the cookies, but also a hand drawn sign hanging from the table that read, organic handmade lemonade. They added an additional sign that said twenty percent of all profits go to the humane society of the United States. Now that lemonade stands. totally crushed it. Passersby would literally hand them five and ten dollar bills and tell them to keep the change. In a span of just two hours, my then eight and six year old cleared$150 in profit and donated 30 bucks to the Humane Society. That's 275% growth between Lemonade Stand 1 and 3.

Now imagine doing this every day for an entire summer. Depending on how many hours and weeks you work, you could, at this rate, realistically clear about$5,000 by Labor Day, which is kind of what Kathle King discovered as an 11-year-old girl. Except her cookie hustle? Turned into a business called Tate's Bake Shop that Kathleen would eventually sell for half a billion dollars. Tate's Cookies is a brand now owned by Mondelez, the huge food company that also owns Oreos, Chips Ahoy, and Roots Crackers. But long before any of this happened, Kathleen started a small bakery in Southampton, on the eastern end of Long Island in New York. For twenty years she grew her little bakery into a sustainable business. Until, as you will hear, She lost almost everything in a bad partnership deal.

And so at the age of forty two. Kathleen had to start all over again. And even though she grew up in the Hamptons, Kathleen did not exactly cross path with the glamorous celebrities and rich financiers who go there in the summertime. Her mom was a nurse and her dad ran the family farm where he raised chickens and cows. When I was growing up, it was about thirty acres.

And my dad used to sell the milk to Schwank Dairy, which was a local dairy. And uh on the cows we had maybe I don't know Mm-hmm. So everything was small. Chickens maybe a thousand. You know, nothing nothing big. How many g how many kids in the family?

I'm the youngest of four, two brothers and one sister. Yeah. We had a lot of responsibility. We were Nurtured emotionally.

But We grew up in the sixties, you know, you fall down, you know, you get up, you cry, I'll give you something to cry about. And you all worked on the farm. That was just expected. It it was just a expected. It was a given. There was there weren't options, though occasionally a brother or sister would escape from time to time to go do something fun. But um I had to collect eggs and

Pick vegetables and wait on the customers. We did everything. Th the interesting part of my growing up was we didn't have any role playing'cause my mother was ahead of her time. So We had to work outside and inside the girls and the Guys the boys had to do the same thing.

W was was your dad's business sustainable? Was it enough? to support the whole family, or were there were there times when you know it was a struggle? No, th it was a struggle. Yeah. My mom, she worked and she brought Um a consistent paycheck into the house. Uh-huh.

Like my my father used to barter like Yeah, a half a steer to the dentist and to get our teeth done and We had everything we needed. We just didn't we didn't go to restaurants and go on vacation. Yeah.

Tell me about Baking. At your house. I mean you're on the farm, you've got responsibilities and chores that you have to do. Um was baking uh just something that was going on at the house all the time? My sister and her friend

We're baking s uh brownies and bread and cookies and selling them at the farm stand, but then when they turned fourteen. They wanted to get a real job. So they can be boys. So they wanted a local ice cream parlor. And I was the youngest, so my dad said, Okay, Kathleen, you're gonna start doing these cookies. You're gonna start making cookies and sell them at the farm. Um, so you can buy your own clothes for school next year and blah blah blah. So I was just like, Okay

And I just started begging him, like we did you know Nobody was coddled then. Nobody taught us, you know. And and what was the recipe you were you were using? On the back of the Nestle chocolate chip bag. The tollhouse chocolate chip cookies, right. Yeah. And did you sell directly to people passing by in their cars or anything like that? Yes, we had a farm stand in the yard. And a matter of fact when I was baking cookies, I would look out the window and see a customer pull up and then I'd run outside.

Wait on the customer. And then sometimes I'd have to say the customer, I'll be right back, I gotta run in because I knew my cookies were gonna be done around that time. And I just baked them and I put them in a plastic bag and Put'em on the counter. So w did you get to keep the earnings from the cookies? Well, yeah, in the beginning. My dad said he would buy all the ingredients and everything, I just made the cookies and made all the money. Yeah. And then as I started selling a lot of cookies, he said we need to discuss our arrangement.

And you have to start buying your own ingredients now. And uh but I always got I always got the eggs for free. By the way, I make my kids pay me for the ingredients for the lemonade stand. Is that horrible? No, that's what you should do. Unfortunately people don't

do that anymore. I mean I want to go up to a lemonade stand sometimes where I say kids and I'm like, why are you selling Newman's own? We should be making your own. You get a niche, you get a niche, get one step above the other sh. Alright, so you are um so you're making uh cookies at the farm stand. But but what what accounts for the fact that you were increasing, like the demand for them was increasing. 'Cause they were really good. And it just started to spread.

But what was so g special about them? Did you change the recipe? Well, when I was eleven I was probably measuring a little haphazardly and then created the cookie the way I liked it. I don't like cakey cookies at all, or thick. Cookies. And

I made them. They were like five inch diameter at least, because back then that was before super sizing. So I wanted to do something that, you know, drew attention to them. So I made them Very large.

And they were thin. They weren't crisp like um tapes are today. But they were they were thin with a little crisp. Chewy? And people would drive there sometimes just for the cookies. So

As I got older the The amount of f sales grew, so By the time I got into high school, I was baking in the summertime seven days a week. Ten hours a day. In my mom's kitchen, and she just allowed me to sprawl.

All over. So by the time you were in high school baking cookies at the stand, um like were you making significant pocket money or even more than pocket money? Oh yeah. Yes, I I bought my own car, you know, like a second hand car, like the kind of car you pay for two a thousand or two thousand dollars. Yeah. You know, in the summer I could earn like five grand.

Wow. And um Yeah, I would just stand there all day and uh and uh you know, and that kind of like fueled my loner side a little bit because I never had a like a real summer job where, you know, there were lots of kids and people did things and they went out and all those things. I just Stood there in the kitchen making cookies.

Alright, so you're so you're actually making some serious dough, people coming by, buying cookies, just you know, and uh I'm assuming that when you were eighteen, when it was time for you to go to college, you didn't think that your life was going to be the life of a cookie baker, that you were gonna go to college and figure out what you're gonna do and and get sort of get a quote unquote real job, right? Yeah, you know, I went to um two year SUNY College, Cobal Skill. I started in restaurant management.

and just kinda went to school and I don't know, I had ideas in my head, Oh maybe I'll work on a cruise ship, you know,'cause I I thought I l might like to travel. I hadn't. And um Then I graduated in nineteen seventy-nine and Went home to make cookies again for the summer because that's where I could make the most money. Sure. And My mom said that some.

So what are your plans? And I was like, I don't know. And she said um Well, this is your last summer making cookies here. Why why did she say that?

Because my mother was also like my father. Independence And standing on your own feet, that was everything. And uh And then she said, You know, there's a a bakery for rent.

In town. So I I went to the big shop. And it was a fully equipped bake shop. Two bakeries had been there prior to me, both have both failed. And so I looked at it and I was like, Oh, this is perfect. This will work for me.

So I just rented it. I needed to work and my goal when I opened the shop was, you know, really to just to rent an apartment. Anna get a car. And and and by the way, how m I mean how much money did you need to To start this bakery, did you

Yeah, and did you have any m I mean did you have some savings? Yeah, I I had five thousand or so that I saved. Before I rent it. And uh I had to um borrow some money and of course I couldn't get it from the bank, so my brother lent me a little bit of money because I had to buy um my chocolate chips was Two thousand dollars and

Uh the store wasn't pretty. I I took old barrels from the farm and I painted them. And turn them upside down and put plywood on top and I made a a tablecloth and put that on top. And then my labels I I wrote by hand. And whe what did you call the shop? Started out as Kathleen's cookie. But then to expand, I changed the name to Kathleen's.

Big shop. Because I sold more things than just cookies. And uh w how long be before you actually opened it to the public? Well, I s I think I rented it in like November and then I opened in May. So what I did that winter was just get things prepared as much as I could and develop

The recipes on a larger scale. So I did blueberry muffins, carrot cake, apple pie, like all like the top. Ten. Typical American Bake goods.

Alright, so May of nineteen eighty. You're like twenty one, twenty two years old, something like that. Yes, twenty one. And it's just you

And you open the shop. I opened the shop. My sister in law, uh Robin King, uh she Helped'cause she was working on the Pi? She had a baby at the time and

My niece Christina, we used to just put her in a box on the floor. And you know, my father was My PR guy, so anyone that went to the farm, he would say, You know, my daughter's open a big shop. Up, up, up, up. And I had an ad back then, print ads. And The you know, the community

was always very supportive of me. So people came. So that summer of nineteen eighty, right, all of a sudden you've got the summer crowds into the Hamptons. Um, how was business? It was good.

I did really well and and right before Memorial Weekend, Florence Fabricant came in from the New York Times. The famous food writer Florence Fabricant. Yes. She just happened to come in like randomly? Yeah, because she lives out there. She may have been shopping there. Prior to coming in and requesting an interview. Did you even know who she was? No, I didn't the New York Times was like what city people read.

So a couple weeks later this article gets published in the New York Times. Yeah. Try your cookies? They did, they did, and I that was not expected because I didn't know the power of the times and

People would tell me like what do you mean you're gonna be in the New York Times? You you need to but And I would be like, Really? Oh okay. You know, I have so naive. So that was uh so you've got this pretty good summer, great summer, uh first summer of nineteen eighty. But then the summer ends and you know, m a lot of those people go home and people come for summer jobs, leave Um what what happens in the fall? Does your business start to kind of slow down?

Significantly. Oh yeah, the business slows down tremendously and then weekends are okay and and you know, for a while you're really grateful for the rest. And then Things get progressively slower and and I thought I needed to change that. So

I went into the city. because that's where most of my customers were from. And Just had my cookies in a shopping bag and just went Door to door to

You know, some customers would tell me, Oh, go to Balducci, go to Zabar, go to Dean Angeluca. Yeah. And I rem I remember walking into Balducci. and I'd be like hi I have cookies. Maybe you want to sell some? And they were like, Yeah, let's see what you got and they would

try him and they were like yeah bring me a hundred bags next week and then I'd go into another store and the someone would not be so nice and he would say, You know my mother can make cookies like this or I made better blah blah blah. You know. So I would just walk out. Mm. I've always had confidence with my cookies. Not so much myself all the time when I was younger, but with my cookies I was like. Hm, you're just wrong. When we come back in just a moment, how Kathleen decides to take on two business partners, a deal that winds up turning

into a total disaster. Stay with us, you're listening to how I built this. From N PR. Welcome back to How I Built This, I'm Guy Raz. So it's the fall of 1980, and Kathleen has started to make trips into Manhattan to pitch her cookies to specialty stores, and it's still pretty much a do-it-yourself operation. So that when she makes the trip back to Southampton?

She's doing most of the baking. And the packaging. Yeah, with my my hand printed label which now I got printed. It was m all handwritten, but then I got it printed. I thought that was major because now I didn't have to sit at night and write them all. But well but how how would customers know to buy your cookies? Like they had a choice? Well because remember, this was um the early eighties. There wasn't competition like there is now. You know, finding like a homemade cookie product. In the stores was um

A great find. you know, people recognize them from the Hamptons and and knew them then. And then, you know, word of mouth just spreads and That's how m most of my whole career So was it at this time where the recipe

for the chocolate chip cookies started to resemble What we know of Tate's cookies today. Yeah, because after a couple of years with Kathleen's cookie I People I feel didn't want everything as

Big and So I I just Started making them smaller. And when I started making'em smaller, that's how they came out. They just came out crispy.

Yeah, and I was like oh these are good. Yeah. You know. When I used to create new products at the bake shop. I used to watch my staff taste the product.

If they taste it and they would be like Well, this is good. And they walked away. And didn't turn around and come back for another bite. I said it wasn't good enough. But what were what were you doing differently? I mean, were you adjusting the butter, were you making brown butter, were you using more brown sugar?

What was it that you were doing? Um You know, I I can't really tell you everything. But um There's no you know, there's there's one little trick

Nothing major. But I can't tell you what that is. Yeah. Fair enough. Listen. It's a half a billion dollar brand. Yeah, gotta protect that product. I know. I know. Alright, so you you start selling these cookies.

Uh to the shops. in in New York City. And is that like Does that become a a significant generator of of revenue for you? Yeah, because uh Off season is long.

You know, uh Hampton season is so short and people think, Oh, everybody's making money hand over fist. I'm like, Well now take that two months worth of money and you've gotta survive for the rest of the next ten. So I started building my brand more in in the city. And was selling that's when it was busy, so I would be selling there.

All winter long, and then of course in the summer I had to maintain it. So I I hi I got another van or so and then I hired drivers. And they would deliver. Tell me what your But you're

Days your average days were like when you were twenty two, twenty three. When I f first opened my first uh bake shop. I would go to work at like two o'clock in the morning. And then bake and then open the store. and then get home at like eight at night.

Then I changed my hours, because that wasn't very healthy. I would drive to work at like two in the morning wanting to like hit a tree so I go to the hospital and rest. Because you know it's very depressing driving to work at two o'clock in the morning and everybody's light is off and you know they're in their bed. So then I changed my schedule. But I worked like eighteen hour days, um six days a week. Wow. It was not easy. It was Mm.

You know, you I gave up my youth, really. Was it overwhelming for you? I mean, you were baking and if you weren't baking, I'm assuming you were like Doing the business stuff. Yeah. Yeah.

It was really hard, yeah. It was really hard. But I was always kind of like well just you just keep working harder, you know, that's how you just try to f figure it out. Stay afloat.

You going. Pride. I didn't know how to say I can't do this. Pride in the other side of that coin is the fear of failure. I didn't have a fear of failure. I just

had more of the fear of saying I can't do this. But you just told me that there were times where you wanted to hit a tree so you could go to the hospital and sleep. Right. So Right, right. So I mean a part of you felt like you couldn't do this, that this was not sustainable. Right, but I just kept working.

'Cause that's how kind of like how I was raised. You just keep going. Yeah. You just keep You just keep pushing. So As you kind of

This business was was kind of growing. I guess um there is a building in South Hampt that becomes available For purchase. Yes. and you decide uh to purchase this to kind of bring your bake shop into that new building. Um was that was that because you had to expand? You were you you needed more space or Yeah, I was outgrowing my current location.

I didn't like having a landlord. And so can my mom sis. Well, you know, there's a building for sale up the road. And I was like, all right. And she said, Well it doesn't hurt to call.

So I met with the owner. It was three hundred fifty thousand dollars for the building and he wanted fifty thousand dollar down payment and he would h he himself would hold the mortgage for three hundred thousand at like nine and a half percent interest back then. Right. I had forty thousand dollars saved. From the business, from sales from the business. Mm-hmm.

And uh I had to somehow find the ten and My family didn't have any money and and then My father used to help this older woman.

With her. Chickens. She had chickens in her yard, I guess. So he helped her from time to time, and when I was looking for the ten thousand dollars, She died. And she left my father ten thousand dollars.

Wow. And he lent it to me. Talk about luck, right? Yeah. Alright, so you have now

a pretty significant mortgage to pay down, right, on this business. So what did that mean for the for your business? Did you have to really ramp up sales to cover your costs? I did. I had to I knew I had to double my business in order to pay for the mortgage. Yeah. And my business plan.

back then was okay, I can do that. That was my plan. Alright, so you start out uh sort of early to mid eighties, right? Mrs. Fields is exploding all over shopping malls in America. Uh there's Famous Amos, there are a couple of other national brands that are starting to come about.

What do you think it was? About your cookies. Was it that it was in the Hamptons and people were on vacation and it was sort of A go to place or or or what? Well, you know, it was kind of like a go to place because it was something that was part of their part of people's weekends. I mean I have kids that are fully grown and married now that come in and say, Oh I mean I gotta uh you know, and I remember them. I they were raised on my cookies. Um

The cookies. You know or thin and crisp and delicious. They were different from Mrs. Fields and David's cookies, which is a nice concept, but more of a fad. You know, they were hot, served off the tray type of cookies.

And I always used to think, how can they grow? Because You can't eat their cookies cold. Yeah. They're only good warm, and now you're really stuck. So um all right, so you are kind of

Growing but it wasn't really your you didn't have a really a plan for it to grow. It's just kind of a an organic slow growth. This was your business. This was a this was a lifestyle business. It was a you were able to pay your rent and even save some money and put it back into the business. Um and did you start to actually was there a point where in those days in the eighties where you started to actually earn even more money for yourself than even your parents earned? Oh yeah, but that wasn't hard. Right,'cause they weren't making a whole lot of money. Right. And and so with with your kind of growing the the growth of the business, were you able to buy a house and And and all those things? Yes. I I bought I bought a little tiny house in the village.

I paid the mortgage off for my No. You know, I started getting Time off I'd get like a

Two days off. And then I had weekends off and Could go on vacation. So basically Kathleen for almost

Twitter. Yes. You were running the bake shop, you were distributing the cookies mainly to Manhattan or b or a little bit beyond there? No, beyond to also Ma to Manhattan and then Long Island then we we also ship cookies to Texas. We did some cookies in California. We did like spottings all over. We were still a small business, pretty much. Oh yeah. And how did you feel about it? Did you I mean you're now in your Starting to approach your forties. Um

Did you feel like You needed a change or you wanted a break, or or did you I you know, I I was like forty years old and Had made um Good money.

You know, I had had gotten Married and divorced, I had no kids. Now I was forty, so like the kid thing was over and the So I was like, just me. So I said, Well, I wanna have, you know More of a life. I want to have less responsibility and

And more time. Um so how are you gonna do that? Well, I decided I would um If I could sell my company, that would be great. But I wasn't really fully prepared to retire. Yeah.

So I um took on two partners. I had a Bookkeeper. Uh he didn't have any money. But he was interested in um becoming

Part owner of the company and paying me off. Along the way. And But h he insisted along the way that his brother also become involved, which I wasn't a hundred percent comfortable with. I didn't really know his brother. But I don't know what happened, why?

I just went along with it. Let me try and understand this. He says I wanna buy into this. Right. And okay, and so okay, so he brings his brother in and they agree to pay you. No, I I read it was about Like nine hundred thousand dollars total. But they were not gonna give you any of this money up front. They were gonna pay you in installments over time.

Right? Yes. And so If he and his brother took over running the business and I still was part of it, but I had more time and then I was part of the h the profit system, and then they would pay me

for the business over time. I was like okay, that's okay because I don't need I don't need any more. I don't need a lump sum of anything. I'm I'm cool. So basically you you kind of brought them in as partners and and did they have a Yes. What was the share? How did you divide it up? We each had one third. So you said yep.

I'll give you A third, I'll take a third, your brother will have a third. Right. You guys run the business, I'll uh but but that m would meant that you gave up two thirds of your business. I always thought one third, one third, one third. was equal. I know it's ridiculously naive. What w did anybody did you go to a lawyer, did anybody say, I Kathleen, I don't know if you want to do this, or or would the did it seem totally like a great idea. No

I I went to a lawyer and everything and and I did have like Second Guessing and You know, and I just said, Well, you know, I I gave my word, I I you know, I can't back out now. I had no idea how horrible.

the deal really was What what is it that they promised you that they wanted to do with the business? Because you're in the Hamptons? Grow the grow the business, obviously, because it definitely had the potential. Do they have any experience doing this? Were they marketers? Were they did they have any of that background. And what was their plan? Wha what was the first thing that they did? Well first they started uh you know at the bake shop and then they went to Virginia to put together a cookie. plant production down there. So they said, Hey, um Kathleen, we want to open up a a production facility, a bakery in Virginia. Mm-hmm. Uh and you thought, Okay, great.

You were fine with that? Yeah, I thought I I thought it would be okay. Because the cookie business was what really was a value and to expand on that. So what happened? They moved down there and uh you stay up in South Hampton? And I stayed in South Hampton. And you just communicate by phone a couple times a day? Yes. When did you when did the tension start to arise?

very early on because Anything that they made or sent From the factory. in Virginia was horrible. Like was Terrible. The cookies were not good were not the cookies weren't good, the pies were terrible. I and I wouldn't sell it. But what was the issue? Were they using I mean they had the recipes?

They had the recipes, but that's like anything you can Nobody was trained. Properly. Making anything correctly. Like an apple pie I remember finding with a whole apple inside.

Mm. Then I'm supposed to be running the Southampton store and depositing the money. Which I'm doing. But they

They were meeting payroll, but they weren't um paying any local vendors, so I got frustrated and so the money that the bake shop made I started pay the local vendors because that they were the ones that were making the money from the bake shop. You mean vendors who would call you and say, Kathleen, we're not getting paid, what's going on? Yeah, and I was like what? Because I always paid my my bills and uh

They weren't weren't paying people and then that's when I put my foot down and I started to pay the local people with the money that I I was making. So when you started to pay The vendors yourself. What did the what did your partner say?

Oh, they had a fit. They were Really angry and they And I was like Well, you know.

This is what I have to do. And then they um I was supposed to go away. For the month of January. This is two thousand. Yeah, on a cycling trip and

A guy that um work down there that moved down there to work down there that I knew he called me and he said, Kathleen They're planning on coming up when you're not there and taking over. Getting rid of you.

So I didn't go on my trip, and I waited. And one day I came to work. They were there. I walked into the office and they handed me papers. Saying that I was fired.

When we come back in just a moment. How Kathleen watched everything she built over 20 years. Collapse. And how that turned out to be the best thing.

Stay with us. I'm Guy Raz and you're listening to How I Built This. From NPR. Hey, welcome back to How I Built This. I'm Guy Raz. So it's early two thousand and Kathleen and her business partners, the Webers, have basically had a total meltdown.

They disagree on just about every aspect of how the business is being run. And so the brothers They fire her. And of course they can do that because they control two thirds of the company. Anyway, according to the records and media reports from the time, Kathleen Basically thought the brothers were running the business into the ground.

And she was devastated. You know, I would Just hold my breath all the time. I think that was the only thing I could control. And uh So m I just started holding my breath and I was like a doe in headlights and

You know, there were moments That were really hard. And then there were moments that were great, you know, because I was just so grateful for waking up in a house. You know, I just the simple things of

Really. going down to like the bare bones of gratitude. Can always get worse. You know, you try to go you get to that place when you get

Down that far? You're not getting up. And what about your business partners? Wha what was the plan? I had to fight them. I had to get my

My business back. And um I wanted to get out of They had

business six hundred thousand dollars into debt I realize even though I was fired and had no job. I was responsible for one third of that debt.

This point the lawsuits start. And this is a super complicated story, as these things u usually are. But but sort of long story short Uh you sue them. They sue you back. And this goes back and forth. And this is just over Like over two years after you first formed this partnership with the Webbers. Yes. I mean

Wow. How quickly that became A nightmare. Yeah.

But The community was incredible. People would call me, people sent me Card, some encouragement, um The community really rallied for me. It became like a

Hallmark made for T V movie. And I said I can spend my days in focusing on The evil of of two people? Or I can spend my days in focusing on all this

Kindness and support that I had no idea. Was there for me. Meanwhile What's going on to the bake shop? Are people still coming in to work? People are still coming to work.

But you know, m a lot of people were not Shopping there any longer. So the business was Uh Going down.

And uh what a hundred percent was going on there I really Don't know, you know, like some of the employees they would Gather at my house. They were very supportive. Yeah. Yeah, so I mean obviously This is a super stressful situation and everyone knows that like

that you know litigation can take years. Mm-hmm. And of course lawyers are expensive. So uh so I guess in the middle of of two thousand you guys decide to settle. Uh you decide to settle with the brothers. Yes. And and as part of that settlement you dropped you gave them the name, the name Kathleen's Bake Shop. became theirs. Mm-hmm. You got to keep

the location in Southampton, the building. Well Yeah, I always owned the location, but unfortunately they were the tenants of the location. Okay. So

I had to get them to release the lease. To get them out. And then as as you mentioned, uh the business had like six hundred thousand dollars of debt at this point. So uh another part of the settlement I read about was was an agreement to divide up that debt. three way. So that means of that total you owed around two hundred thousand dollars. Mm-hmm.

And And you lose your name. Your name. Your own name. You cannot use Kathleen's bake shop or Presumably Kathleen's cookies or anything like that. That must have been How did you get to a point where you were able you were able to let that go?

Mm. I don't know. It's kinda like how I opened the first bake shop. You just do. Yeah. You know, you just You just do because What's your choice?

Were you bitter? Were you just I mean,'cause I can imagine I would be, right? Were you just like seething? I don't know. Like I can't say bitter. I don't I've not this not my nature either. Um

I was angry. Yeah. Which, you know, will help me. to recreate a new brand. Like

The whole point of of starting this partnership with these two people was to give yourself some freedom and space to kind of, you know, enjoy life. You had worked really hard for twenty years. I know. Got way more than I bargained for. And so now you find yourself you're like forty two.

You're back in the situation where You have to if you want to uh keep going, you've got to completely start from scratch. You've got to s be a start up all over again. Yeah. It was um It was very draining, I I would say Up to like rage and bitterness and all of that. I was really kind of more I walked around kind of in a little bit in shock. I had

Felt that You know, every emotion that I could have ever had was stripped down to the bone. And I don't No, what I had left in me.

Truthfully. And I didn't have any choices, like I I couldn't go get a job anywhere else because I didn't know how to do anything else. I just had two years of college, um, and the things that I didn't know how to do I used to hire people to do. So really I didn't have a choice but to start

Again and do what I knew. That's how I Okay. So you you decide that you are going to You're gonna reconstitute this business.

And by the way, keep your old employees. Yes. And so what what were you gonna call it? Tate's big shop. And how did that what where did the name come from?

Tate was my dad's name. Yeah. Was just a um nickname, but he everybody called him that. So I wanted a name that um

was like an local name that That was genuine and integrity and kind and that was like my dad, so I thought that that would fit. Nicely for the big shop. And um

I ended up I had to get open for August because it was the season and the August at least I could make some money. And you'd been out of the kitchen and the business since February. You were locked out, right? Yes. You know, my employees, they all rallied to work hard and

I um ended up remortgaging the bake shop because I had already had it paid off. 'Cause it was a fifteen year mortgage, so thank God for that. I remortgaged the bake shop so I got some money so I could have some cash flow to Make more money. Yeah. And then

I ended up hiring. A business manager because I was in such financial trouble I needed to have a business creating income and this The the business manager who who who was he and how'd you find him? His name was Michael Namey. He was in the city and he became my my business advisor, which really was uh A godsend from me.

'Cause I am very instinctual, but of course I I make mistakes from time to time. And and when you When you hired Michael to help you launch Tate were you I mean I have to imagine a a part of you is still kind of standoffish, right? Because y you've just gotten burned really bad.

I mean w were there like trust issues there? No, he was great. I was like he felt he felt to me like a lifeline, but it was safe because I could walk away any time I wanted. You know, I wasn't bound by any contract or money or anything. I find not trusting people way too exhausting.

And It's not the way. I want to live my life. So I was very, very naive. And

I used to trust blindly. Now I still trust everybody, but I trust with my eyes open. All right, but now you have to reestablish your brand. Right, as Tate. It's the same cookie, but you gotta reestablish a brand new brand. Yeah, so there meantime, those guys are down in Virginia with plans presumably to take your brand that you had spent twenty years building up and really

uh expanding that did were you did that cause anxiety for you? Did you think oh my God, they're gonna take my name, my brand, and they're gonna go all over the country and people are gonna think it's me. No. Because um I don't think about what others And

I just had to think about what I had to do. And of course. My goal was to take them down. Yes, to be better. So did you continue on with your previous strategy of baking in the retail shop and baking for wholesale um and mainly kind of

Courme you know, shops in in major cities in the US. Yes, and um when Michael came on board. We went through all the products and the products that had the highest margins.

is the ones we focused on selling. So we just kinda really zeroed in on the cookies. You know Starting Tates was About surviving.

So You know, when you're in a survival mode Those things those kind of decisions weren't hard. They just had to be executed. They just had to be done. So where were you guys um I mean, did you in start to expand your distribution? Yeah. First of all I had to get I had to get all of Long Island and New York City back.

Because My whole story was so public. Some stores. Welcome me with open arms, some stores stuck with the Kathleen's brand. A lot of stores carried both. Right.

And that's how it uh shook out and then even when I was some vendors I had for twenty years and and when I opened up Tates they treated me like I was a brand new customer. Mm. Others were just so helpful and just said, Okay, I know you owe us this forty thousand dollars, you know, you pay that off when you can and And we're stand by you.

You know, it was amazing. You know, just the difference of people just amazing. So when you re launched the company as Tate, You had wanted to take a break in your life. You knew that was not gonna happen any time soon because all of a sudden you got a start up again. Right.

Um and so were you back to that hamster wheel, back to those crazy long hours? Uh only for a short time because When I open tapes. Then I had a plan and I had a goal. And what was your plan? Wha what was the goal? I had to have an exit strategy.

My goal was to sell when I was fifty five. So you knew when you reconstituted this thing and you re launched it. There was a time horizon. Yes. And you were thinking maybe some local business would would buy it or something like that. No, I thought I did think bigger than that. I didn't think as big as I went. But you know, I was gonna sell at fifty five so I could retire.

I mean you're still a pretty small shop at this point, right? It's still forty Or so employees. Uh when I first opened Tate's, yeah. And in those first few years of Tates, like what was your annual revenue? I mean I would say

We maybe started out. Um Couple million? But As we start to expand, I I

couple years down the road I rented a a five thousand square foot additional kitchen and And then I needed to we outgrew that and so then we needed something bigger. So I I purchased a school in East Marichus. And you turn that into a f uh bakery to to start to bake.

More cookies. Yes, it we turn that into a commercial kitchen. First making it fifteen thousand square feet and then adding on uh'cause it had we had space to add on and we added on as as we needed. And by the way, your former business partners who have the name Kathleen's Bake Shop mean they were still trying to

compete with you, right? But uh but then I guess just a few years after the lawsuit and and then the settlement, they actually Go out of business. Yeah. I never even know what happened to them. You have no idea what happened to them?

No. I don't know what happened with the name, with the brand, n nothing. I just doesn't exist. As far as I know. Well. So

Was it pretty clear to you? pretty soon after you launched Tates that you know, this wasn't just about survival mode that this could actually grow. This could actually get Bigger than than Kathleen's? Uh yes, because that was my plan.

But how are you gonna do that? Because you know, food companies, um b the big guys, right, the General Mills and the Kellogg's and the I mean they and you know They have uh huge distribution networks. They decide what goes on the supermarket shelves where. How are you guys negotiating and and getting big companies to pay attention to you and to c to agree to distribute and put your stuff on their shelves. Well that took time. I mean first of all we started where first we had our own trucks. And we went for small guys with like ten to twelve SKUs. And then we would strategically

Pick. areas of the United States that we were going to go Cell to start to build our foundation with upscale. Gourmet shops. That's kind of like the first tier when we were building our brand. And then as we started to get bigger, we went into the second tier, which was like the Whole Foods, the fresh markets, the you know Ciderella. And how would you get how would you get those meetings? You would I mean the I'm assuming some buyers for Whole Foods may have seen your products at some of these smaller stores?

Yeah, I mean some some buyers w you know would contact us, um You know, Michael was also a great sales person. So He helped negotiate some of those deals to get into various uh

Locations. And because Michael was such a great Numbers guy? And forecaster? We did then do every year he would say, Okay, this here's the plan. I had drew up three forecasts for you. We can do A, B, or C.

If you do this route, you'll make this. If you do this route, you'll make this. And if you do this route, you'll make this. And then he would say which Which route do you want to take? And I would say Okay, this this one works for me. And then we would do it.

So as you were kind of rebranding and growing again, I mean, you start to get attention again. I mean, I think Rachel Ray, like it was on her show, she said, this is the best cookie in America and then Uh the consumer reports voted Tate's bake shot the best cookie in America. Consumer Reports did that d oh you know, twenty eleven when when Consumer Reports called you the best cookie in America and after Gwyneth Powell Trough and Rachel Ray and all these people are saying that about your cookies, were the were the lines starting to go out the shop? Um you know, we were always busy. Like I can't say you know the lines out the door, but we were always increasing, you know. Tates, you know, had like a thirty percent or more increase per year. Wow. Yeah, which is amazing.

When when I guess when you started to get closer to age fifty five, you were serious. This really was your plan. You were sticking to this plan. Yes. I am going to I wanna an exit. Yeah. And so how did you even begin that process? Who who how do you what do you do? Who do you tell? How do you put your business up for sale? Well You know, my business manager and I we would discuss it a a lot and and a lot of um You know, investment bankers they're all watching. But This time around I was going to do everything right.

And I wasn't going to leave a penny on the table. So I interviewed a couple Bankers and I settled with TM Capital in New York City. And they were basically go gonna take your company and say, All right, it's available.

Yeah. Right. And this is 2014, I think, or under two thousand thirteen, yeah. So they started to to do that. And because this was already a pretty strong brand, it had name recognition. It had value. I mean were there lots of bidders? Yes.

Well there was it well started off with like like something like fifty people. Wow. That showed an interest. We narrowed it down. to like twelve. You know.

Thank you put in another bid and then it it came down to like five. I I think that um I I think eventually a um a private equity or investment from Riverside But a majority stake. Yes.

Riverside. And I ended up selling uh eighty percent of the company because I was really ready to Retire?

They paid a hundred million dollars for it in twenty fourteen. Yes. Was that just insane to you? I mean, wow. He started this out of a farm stand in nineteen seventy. I mean w a hundred million dollars, d did you even imagine that that's what it would go for? No, um you know, it went for like twice for what I originally thought. Yeah.

And I remember The closing over the telephone I was in my own office. Everybody's on the phone. And then it was over. It was done. And everyone's like, Okay, yay, thanks, bye. And I walked out of my office and

I think I went home and made dinner. I don't know. I it was so You know. Kind of another deer and headlights moment. I mean I wonder given the fact that you grew up in a pretty modest environment, right? Mm-hmm.

Um, watching the sort of the rich and famous come to the Hamptons. Um you know. when you were a kid. mean suddenly you had a lot of money. Like you sort of become one of those rich people in in the Hamptons, right?

Uh I didn't become that, but other people thought I became that. I thought I lived great. Before. Really haven't changed?

The way I I live. Um, because I like the way I live. Like I'm all about freedom. And time.

Yeah. Yeah, I can I can donate more and I can Be more generous, which is great. The one nice thing is that you know, I

dream property of of childhood that I never thought. would have ever been. an opportunity in my lifetime. But other than that.

Everything else is the same. I like to ride my bike, I like to wear jeans and a T shirt, I like to s Watch movies on my own TV. Lot of stuff, you know, it it creates a burden. I don't want anything I can't use, I don't want anything I have to guard. I uh uh uh just doesn't interest me. I mean Kathleen, think about this for a moment. Majority stake in twenty fourteen for a hundred million.

Riverside four years later. Sold it to Mondolise um they make Oreos and Chips Oi for half a billion dollars. Your brand, Tate's this brand that you kind of reconstituted from the ashes of this

terrible venture, this disaster. I mean the the the the irony uh of the crisis that you went through in two thousand is that Without it you would have never built Tates and you you may not have become the kind of person Who could Build a company like Tates, right?

Yes, that that that is true. The biggest disaster of my life was. really became the greatest gift of my life. And like when I started Tate's, I said I'm not giving blood. for this company because

I did that already for Kathleen's and I ended up standing there with nothing. And the thing I regretted losing the most was my youth. Mm. I worked my youth away. You can't get that back. You can't buy that back. It was quite an eye opener to realize

We are society of feeling like we have to give up everything and sacrifice everything and work day and night in order to achieve and get ahead. But in the big picture, it's really not true. You have to do it for a period of time.

But the key point. is knowing when to let it go. Yes, to create something from nothing requires that kind of dedication of day and night, but a lot of it is is self-driven of Nobody's as good as I am, nobody can do it as good as I can. And that keeps you trapped. Because you're too focused on

All that emotional attachment that comes with creating. Something from nothing. And you were able to shed that emotional attachment with the Disaster of the first business, I guess.

Yes, because I was basically stripped of everything. Yeah. When you think about all of the work you put in, the sacrifice that you made and you know, you talk about kinda giving up your youth. Like you you had to kinda give that time up. Um

Given what happened and and the exit and the incredible success that you For you saw. Do you regret it? Do you regret any of that? 'Cause I think a lot of people listening would say no, it was all worth it. D would you say that's the case? No.

Um, I've asked myself that. uh several time Sometimes when I see young people working like really, really hard, like in the in the corporate circle Going round and round. I say to them, you know.

Try to always keep the balance because If I had to ask myself if I would do it all over again, would I? I still don't really have an answer. Do you feel, Kathleen, like what happened to you and And the success of this company is

Due to The work you put into it, your just your relentless hard work, or do you think that it had more to do with luck? Ah no, it's not luck, I think. It was more um I worked really hard.

I never let It's success get the best of me? If anything and not luck, I think sometimes it was my destiny. I know, um I know Kathleen that um

Your your folks passed away recently. Um but they did get to see you. Achieve incredible success. From this cookie stand. Yes. They they didn't see the Mondolise sale, but they saw The Riverside Sail. What do they think? I mean, what did your parents think?

You were selling us these cookies in the farm stand outside the d I mean, your dad was a dairy farmer, like What did they think about this? It's very funny, you know, because you know, I sold it. It was in the paper and They never said that.

A word about money. Not a word. They just were like, Oh, congratulations, I'm proud of you to They never Once.

Mentioned. The money. My father always told me. As I was Becoming successful.

Never forget where you came from. He must they must have been so proud of you. They were. They really were. That's Kathleen King, the founder of Kathleen's Bake Shop and hate make sure.

By the way, Kathleen still likes to bake cookies at home and she loves spotting taste cookies out in the wild. In fact, a while back She was on a bike tour of the Natchez Trace Parkway, and at one point her guide stopped to take a break. He reached into his backpack. Pull out a bag of tates, handed one to Kathleen, and asked.

You ever tried these cookies? They're amazing. Hey, thanks so much for listening to the show this week. This episode was produced by Casey Herman with music composed by Raptine Arab Lui. It was edited by Neva Grant with research help from David Ja. Our production staff includes JC Howard, Julia Carney, Elaine Coates, Farah Safari, Liz Metzger, and Harrison VJ Choi. Our intern is Katherine Seifer, Jeff Rogers is our executive producer, I'm Guy Raz, and you've been listening to How I Built This. This

is NPR.

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