How I Built This with Guy Raz - Tate's Bake Shop: Kathleen King (2019)

Episode Date: December 27, 2021

Kathleen King was 11 years old when she started baking cookies to sell at her family's farm stand on Long Island. After college, she opened a small bake shop, and eventually started selling her cookies to gourmet grocery stores in Manhattan. But after twenty years of running a small business, she wanted more time for herself. She brought in two partners to grow sales, but the partnership was a disaster—and after bitter lawsuits, Kathleen was forced to start over from scratch. 18 years later, Tate's Bake Shop—the second cookie brand that she built out of the crumbs of the first—sold for $500 million. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com. 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, bed bath and beyond. But back when it began, there was only one place you could buy one of those trademark crispy chocolate chip cookies. And that was a little farm stand on Long Island.

And the story of how Tate's cookies got from there to here is 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 get free of them. I had to get my business back. From NPR, it's how I built this. A show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz. And on today's show, how Kathleen King started. started out selling cookies from her family's farm stand for 59 cents a bag, then 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 kind of 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, $2 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 20% of all profits go to the Humane Society of the United States. Now that lemonade stand totally crushed it. Passers-by 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 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 Kathleen 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 Mondelees, the huge food company that also owns Oreos, Chips A Hoy, and Ritz 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 20 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 42, Kathleen had to start all over again. And even though she grew up in the Hamptons, Kathleen did not exactly cross paths 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 30 acres, and my dad used to sell the milk to Schwank Dairy, which was a local dairy. And on the cows, we had maybe, I don't know, 30 or 40.

So everything was small. Chickens, maybe, a thousand, you know, nothing big. How many kids in the family? I'm the youngest of four, two brothers and one sister. We had a lot of responsibility. We were nurtured emotionally, but we grew up in the 60s. 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. We did. It was just expected. It was a given. There weren't options, though. Occasionally a brother or sister would escape from time to time to go to something fun. But I had to collect eggs and pick vegetables and wait on the customers.

We did everything. The interesting part of my growing up was we didn't have any role playing because 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. Was your dad's business sustainable? Was it enough to support the whole family? Or were there times when, you know, it was a struggle? No, it was a struggle. Yeah.

My mom, she worked and she brought a consistent paycheck into the house. Uh-huh. Like my father used to barter like, you know, a half a steer to the dentist 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. Was baking just something that was going on at the house all the time? My sister and her friend were baking brownies and bread and cookies and selling them at the farm stand. But then when they turned 14, they wanted to get a real job so they could be boys. So they wanted to go into a local ice cream parlor.

And I was the youngest. So my dad said, okay, Kathleen, you're going to start doing these cookies. You're going to start making cookies and selling them at the farm. 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 baking them. Like, we didn't, you know, nobody was coddled then. Nobody taught us, you know.

And what was the recipe you were using? On the back of the Nestle chocolate chip bag. The Toll House, chocolate 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've got to run in because I have to. I knew my cookies were going to be done around that time. And I just baked them, and I put them in a plastic bag, and put them on the counter. So 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. Of course. And, but 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 see 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 others. All right. So you are, so you're making cookies at the farm stand. But what accounts for the fact that you were increasing, like the demand?

for them was increasing. Because they were really good, and it just started to spread. But what was so special about them? Did you change the recipe? Well, when I was 11, I was probably measuring a little haphazardly and 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 supersizing. So I wanted to do something that drew attention.

to them. So I made them very large, and they were thin. They weren't crisp like Tate's are today, but they were thin with a little crisp, chewy, and people would drive there sometimes just for the cookies. So as I got older, the amount of sales grew. So by the time I got into high school, I was baking in the summertime, seven days a week, 10 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, like were you making significant pocket money or even more than pocket money? Oh, yeah.

Yes, I bought my own car, you know, like a secondhand car, like kind of car you'd probably for a thousand or $2,000. Yeah. You know, in the summer I could earn like five grand. Wow. And, yeah, I would just stand there all day. And, you know, that kind of like fueled my loaner side. a little bit because I never had 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. All right. So you're actually making some serious dough. People coming by buying cookies, just, you know, and I'm assuming that when you were 18, 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 going to go to college and figure out what you're going to do and get sort of get a quote-unquote. real job, right? Yeah, you know, I went to two-year SUNY college, Cobleskill. I started in restaurant management and just kind of 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, because I thought I might like to travel.

I hadn't. And then I graduated in 1979 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 summer, so what are your plans? And I was like, I don't know. And she said, well, this is your last summer making cookies here. Why did she say that? Because my mother was also like my father.

Independence and standing on your own feet, that was everything. And then she said, you know, there's a bakery for rent in town. So I went to the bake shop, and it was a fully equipped bake shop. Two bakeries had been there prior to me. Both had 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 this shop was, you know, really to rent an apartment and get a car. And by the way, how much money did you need to start this bakery? Did you have any money? I mean, did you have some savings? Yeah, I had 5,000 or so that I saved before I rented. And I had to 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 my chocolate chips was $2,000. And the store wasn't pretty. I took old barrels from the farm and I painted them and turned them upside down and put plywood on top. and I made a tablecloth and put that on top. And then my labels, I wrote by hand. And what did you call the shop? Started out as Kathleen's cookie. But then to expand, I changed the name to Kathleen's bake shop

because I sold more things than just cookies. And how long before you actually opened it to the public? Well, 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 10 typical American baked goods.

All right, so May of 1980, you're, like, 21, 22 years old, something like that. Yes, 21. And it's just you, and you opened the shop. I opened the shop. My sister-in-law, Robin King, she helped, because she was working on the pie. She had a baby at the time, and my niece, Christina, we used to just put her in a box and the floor. I had a blanket in it. 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.

And I had an ad back then, print ads. And, you know, the community was always very supportive of me. So people came. So that summer of 1980, right, all of a sudden you get the summer crowds into the Hamptons. How was business? It was good. I did really well, 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. 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. Did people start to clamor to come try your cookies? They did. They did. And 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 going to be in New York Times? You need to. Bub, blah, blah, blah. And I would be like, really? Oh, okay. You know, I was so naive. So you've got this pretty good summer, great summer, first summer, 1980. But then the summer ends. And, you know, a lot of those people go home and people come for summer jobs, leave. 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, you know, for a while, you're really grateful for the rest. And then things get progressively slower, 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 places. You know, some customers would tell me, oh, go to Balducci, go to Zabar, go to Dean and Dulacup. Oh, your customers that were coming out to the Hamptons were saying, you know, you really should make these available in the city.

Yeah. And I remember walking into Balducci, cold calling, 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 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. 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, 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 NPR. Hey, 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. Patton 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 hand-printed label, which now I got printed. It was 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 how would customers know to buy your cookies? Like they had a choice of them. Because remember, this was the early 80s. There wasn't competition like there is now.

You know, finding like a homemade cookie product in the stores was a great find. You know, people recognized them from the Hamptons and knew them then. And then, you know, word of mouth just spreads. And that's how most of my whole career was established. So was it at this time where the recipe for the chocolate chip cookie started to resemble what we know of Tate's cookies today? Yeah, because after a couple years with Kathleen's cookie, people, I feel, didn't want everything as big.

So I just started making them smaller. And when I started making them 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, oh, 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 you doing differently? I mean, were you adjusting the butter? Were you making brown butter? We're using more brown sugar. What was it that you were doing? You know, I can't really tell you everything. But there's no, you know, 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. You've got to protect that product. I know. I know. All right, so you start selling these cookies to these shops in New York City. And is that like, does that become a significant generator of revenue for you? Yeah, because off season is long.

You know, 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 got to survive. for the rest of the year. The next tent. Yeah. So I started building my brand more 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 got another van or so, and then I hired drivers. And they would deliver. Tell me what your average days were like when you were 22, 23. When I first opened my first of the big show, I would go to work at like 2 o'clock in the morning and then bake and then open the store and then get home at like 8 at night. Then I've changed my hours because that wasn't very healthy.

I would drive to work at like 2 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 2 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 18 hour days, six days a week. Wow. It was not easy. It was, you know, 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 keep working harder. You know, that's how you just try to figure it out, stay afloat.

What was the thing that kept you? going? Pride. I didn't know how to say I can't do this. Pride. And 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. 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 because that's how kind of like how I was raised. You just keep going.

Yeah. You just keep pushing. So as you kind of, this business was kind of growing, I guess there is a building in Southampton that becomes available for purchase. Yes. And you decide to purchase this to kind of bring your bake shop into that new building. Right. Was that because you had to expand? You needed more space?

Yeah. I was outgrowing my current local. I didn't like having a landlord. And so, okay, my mom says, well, you know, there's a building for sale up the road. And I was like, oh, right. And she said, well, it doesn't hurt to call. So I met with the owner. It was $350,000 for the building, and he wanted $50,000 down payment.

And he himself would hold the mortgage for $300,000 at like 9.5% interest back then. Right. And I had $40,000 saved. From the business, from sales from the business. Mm-hmm. And I had to somehow find that 10, and my family didn't have any money. 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 $10,000, she died. And she left my father $10,000. Wow. And he lent it to me. Talk about luck, right? Yeah. All right, so you have now a pretty significant mortgage to pay down, right, on this business.

So what did that mean for your business? Did you have to really ramp up sales to cover your costs? I did. 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. All right, so you start out sort of early to mid-80s, right?

Mrs. Fields is exploding all over shopping malls in America. There's Famous Amos. There are a couple other national brands that are starting to come about. What do you think it was, I mean, 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 what? Well, you know, it was kind of like a go-to place because, It was something that was part of people's weekends. I mean, I have kids that are fully grown and married now that come in and say,

oh, me, I got, you know, and I remember them. They were raised on my cookies. The cookies, you know, are 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, all right, so you are kind of, it sounds like the business was growing, but it wasn't really your, you didn't have really a plan for it to grow. It was just kind of an organic, slow growth. This was your business. This was a lifestyle business. You were able to pay your rent and even save some money and put it back into the business.

Right. And did you start to actually, was there a point where in those days, in the 80s, where you started to actually earn even more money for yourself than even your parents earned? Oh, yeah, but that wasn't hard. Right, because they weren't making a whole lot of money. Right. And so with your kind of growing, the growth of the business, were you able to buy a house and all those things? Yes, I bought a little tiny house in the village.

I paid the mortgage off for my family's farm. You know, I started getting time off. I'd get like a day off, and then I had two days off, and then I had weekends off, and could go on vacation. So basically, Kathleen, for almost 20 years. Yes. You were running the bake shop. You were distributing the cookies mainly to Manhattan or a little bit beyond there? No, beyond.

Also did Manhattan and the Long Island. And then we also shipped cookies to Texas. We did some cookies in California. We did like spottings all over. You were still a small business, pretty much. Oh, yeah. And how did you feel about it? Did you, I mean, you're now and you're starting to approach your 40s.

Right. Did you feel like you needed a change or you wanted a break or did you? Yeah. You know, I was like 40 years old and had made good money. You know, I had gotten married and divorced. I had no kids. I was 40, so the kid thing was over. So I was like just me.

So I said, well, I want to have, you know, more of a life. I want to have less responsibility and more time. So how are you going to do that? Well, I decided I would, if I could sell my company, that would be great. But I wasn't really fully prepared to retire. So I took on two partners. I had a bookkeeper. He didn't have any money, but he was interested in becoming a part owner of the company and paying me off along the way.

But he insisted along the way that his brother also become involved, which I wasn't 100% comfortable with. I didn't really know his brother. But I don't know what happened. Why I just went along with it. Wait, let me try and understand this. says, I want to buy into this. Right. And okay. And so, okay, so he brings his brother in and they agree to pay you. And I read it was about like $900,000 total. But they were not going to give you any of this money up front. They were going to 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 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 any more. I don't need a lump sum of anything. I'm cool. So basically, you kind of brought them in as partners. And did they have a –

Yes. What was the share? How did you divide it up? We each had one third. So you said, yeah, I'll give you a third. I'll take a third. Your brother will have a third. Right.

You guys run the business. But that 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. Did anybody – did you go to a lawyer? Did anybody say, Kathleen, I don't know if you want to do this. Or did it seem totally like a great idea? No.

I went to a lawyer and everything. And I did have, like, second guessing. And, you know, I just said, well, you know, I gave my word. I can't back out now. I had no idea how horrible the deal really was. What is it that they promised you that they wanted to do with the business? Because you're in the Hamptons. Well, grow the business, obviously, because it definitely had the potential.

Do they have any experience doing this? Were they marketers? Do they have any of that background? No. And what was their plan? What was the first thing that they did? Well, first they started, 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, Kathleen, we want to open up a production facility, a bakery in Virginia. And you thought, okay, great. You were fine with that? Yeah. 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 you stay up in Southampton. And I stayed in Southampton.

And you just communicate by phone a couple times a day? Yes. 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, it was terrible. The cookies were not good. The cookies weren't good. The pies were terrible.

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. Nobody was trained properly. Nobody was making anything correctly. Like an apple pie, I remember finding with a whole apple inside. Then I'm supposed to be running the Southampton store and depositing the money, which I'm doing.

But they were meeting payroll, but they weren't paying any local vendors. So I got frustrated, and so the money that the bake shop made, I started paying the local vendors because they were the ones that were making the money from the bake shop. You mean vendors 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 bills, and they 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 was making. So when you started to pay the vendors yourself, 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, I was supposed to go away for the month of January. This is 2000? Yeah, on a cycling trip. And a guy that worked 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 and 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 that ever happened to her. 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 2000 and Kathleen and her business partners, the Weber's, who 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 so 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?

Just the simple things of really going down to like the bare bones of gratitude because it 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? What was the plan? I had to fight them. I had to get my business back.

And I wanted to get out of. the contract because they at that point 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. So, okay, so at this point, the lawsuit start. And this is a super complicated story, as these things usually are. But sort of long story short, you sue them. They sue you back.

Right. And this goes back and forth. And this is just over, like, over two years after you first formed this partnership with the Weber's. Yes. I mean, wow. I mean, that's how quickly that became a nightmare. Yeah. But the community was incredible.

People would call me. People sent me cards, simple encouragement. The community really rallied for me. It became like a hallmark, maybe. for TV movie and I said I can spend my days and focusing on the evil of two people or I can spend my days and 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 into work? People are still coming to work, but a lot of people were not shopping there any longer.

So the business was going down. And what 100% 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.

And, of course, lawyers are expensive. So I guess in the middle of 2000, you guys. decide to settle. You decide to settle with the brothers. Yes. Right. And as part of that settlement, you dropped, you gave them the name. The name Kathleen's bake shop became theirs. 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. So I had to get them to release the lease to get them out. And then, as you mentioned, the business had like $600,000 of debt at this point. So another part of the settlement I read about was an agreement to divide up that debt three ways.

So that means of that total, you owed around $200,000. 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. First of all, that must have been. How did you get to a point where you were able to let that go? I don't know. It's kind of like how I opened the first bake shop. You just do.

You know, you just do because what's your choice? Were you bitter? Were you just, I mean, because I can imagine I would be, right? Were you just, like, seething? I don't know. I can't say bitter. I don't, that's not my nature either. I was angry.

Yeah. which, you know, will help me to recreate a new brand. But the whole point of starting this partnership with these two people was to give yourself some freedom and space to kind of, you know, enjoy life. You'd worked really hard for 20 years. I know. Got way more than I bargained for. And so now you find yourself, you're like 42,

you're back in the situation where you have to, if you want to keep going, You've got to completely start from scratch. You've got to be a startup all over again. Yeah, it was very draining. I would say, opposed to, like, rage and bitterness and all of that, I was really kind of more. I walked around kind of 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 know what I had left in me, truthfully.

And I didn't have any choices. Like 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 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 did it. So you decide that you are going to, you're going to reconstitute this business. And by the way, keep your old employees? Yes. And so what were you going to call it? Tate's Big Shop. And how did that, what did that name come from? Tate's, it was my dad's name.

It was just a nickname, but everybody called him that. So I wanted a name that was like a 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 bake shop. And I ended up – I had to get open for August because it was the season, and that 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.

Wow. You know, my employees, they all rallied to work hard, and I ended up remorgeting the bake shop because I had it paid off. because it was a 15-year mortgage, so thank God for that. I remorgeted to the bake shop, so I got some money so I could have some cash flow to make more money. 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 the business manager, who was he and had you find him?

His name was Michael Namy. He was in the city, and he became my business. advisor, which really was a godsend for me, because I am very instinctual, but of course, I make mistakes from time to time. And when you hired Michael to help you launch Tates, were you, I mean, I have to imagine a part of you was still kind of standoffish, right? Because you've just gotten burned really bad. I mean, were there, like, trust issues there?

No, he was great. I was like, he felt to me like a lifeline. But it was safe. 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've got to reestablish a brand new brand. Well, I had to actually make a better cookie because I had to compete against Kathleen's bake shop. Yeah, so there meantime, those guys are down in Virginia with plans presumably to take your brand that you'd spend 20 years building up and really expanding that. Did that cause anxiety for you? Did you think, oh, my God, they're going to take my name, my brand, and they're going to go all over the country and people are going to think it's me.

No, because I don't think about what others are doing, and I just had to think about what I had to do. And, of course, my goal was to take them down. Your goal was to beat them. Yes, to be better. So did you continue on with your previous strategy of baking in the retail shop and baking for wholesale and mainly kind of gourmet shops in major cities in the U.S.? Yes. And 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 kind of really zeroed in on the cookies. You know, starting Tate's 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, I mean, did you start to explain? band your distribution? Yeah. First of all, 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. And that's how it shook out. And then even when I was, some vendors I had for 20 years, and when I opened up Tates, they treated me like I was a brand new customer. Others were just so helpful. and just said, okay, I know you owe us this $40,000, you know, you pay that off when you can, and we're stand by you. You know, it's amazing. You know, just the difference of people, just amazing. So when you relaunched the company as Tate's, you had wanted to take a break in your life.

You knew that was not going to happen anytime soon because all of a sudden you got a startup again. Right. And so were you back to that hamster wheel, back to those crazy, long hours? Only for a short time because when I opened Tate's, then I had a plan and I had a goal. And what was your plan? What was the goal? I had to have an exit strategy. My goal was to sell when I was 55. So you knew when you reconstituted this thing and you relaunched it, there was a time horizon. Yes. And you were thinking maybe some local business 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 going to sell it.

55 so I could retire. I mean, you're still a pretty small shop at this point, right? It's still 40 or so employees? When I first opened Tate's, yeah. And in those first few years of Tate's, like, what was your annual revenue? I mean, I would say we might be started out a couple million. But as we start to expand, a couple years down the road, I rented a 5,000 square foot additional kitchen. And then I needed to, we outgrew that, and so then we needed something bigger.

So I purchased a school in East Mauritius. And you turned that into a bakery to start to bake more cookies? Yes, we turned that into a commercial kitchen. First making it 15,000 square feet and then adding on, because we had space to add on, and we added on as we needed. And by the way, your former business partners who have the name Kathleen's Bake Shop, I mean, they were still trying to compete with you, right? But then, I guess, just a few years after the lawsuit and then the settlement, they actually go out of business.

Yeah. I didn't 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. Nothing. I just doesn't exist as far as I know. Wow.

So was it pretty clear to you pretty soon after you launched Tate's that, you know, this wasn't just about survival mode that this could have. actually grow? This could actually get bigger than Kathleen's? Yes, because that was my plan. But how are you going to do that? Because, you know, food companies, the big guys, right, the General Mills and the Kellogg's, and they, you know, they have a huge distribution networks. They decide what goes on the supermarket shelves where. How are you guys negotiating and getting big companies to pay attention to you and to agree to distribute and put your stuff on their shelves? Well, that took time. I mean, first of all, we started, first we had our own trucks. And we went for small guys with like 10 to 12 SKUs.

And then we would strategically pick areas of the United States that we were going to go sell 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, Sutterella. And how would you get those meetings? I mean, I'm assuming some buyers for Whole Foods may have seen your products at some of these smaller stores. Yeah. I mean, some buyers, you know, would contact us.

You know, Michael was also a great salesperson. So he helped negotiate some of those deals to get into various locations. And because Michael was such a great numbers guy and forecaster. We did then do every year. He would say, okay, here's the plan. I 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 then he would say, which route do you want to take? And I would say, okay, 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, you wrote like it was on her. on her show. She said, this is the best cookie in America. And then...

The Consumer Reports voted Tate's Bake Shot, the best cookie America. Consumer Reports. Yes. Did that... You know, 2011, when Consumer Reports called you the best cookie in America, and after Gwyneth Paltrow and Rachel Ray and all these people are saying that about your cookies, were the lines starting to go out the shop? 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, Tate's, you know, had like a 30% or more increase. per year. Wow. Yeah, which is amazing. When, when, I guess, when you started to get closer to age 55, you were serious. This really was your plan. You were sticking to this plan. Yes. I am going to,

I want an exit. Yeah. And so how did you even begin that process? Who, who do you, what do you do, tell? How do you put your business up for sale? Well, you know, my business matters and I, we would discuss it a lot and, and a lot of, you know, investment bankers. There were, 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 going to go, going to take your company and say, all right, it's available. And market it to sell it. Right. And this is 2014, I think, around 2013. Yeah. So they started 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. It started off with like something like 50 people that showed an interest. We narrowed it down to like 12, you know, they put in another bid and then it came down to like five. I think that, I think eventually a private equity or investment from Riverside, but a majority stake. Yes. In the end, we settled on Riverside, and I ended up selling 80% of the company because I was really ready to retire.

They paid $100 million for it in 2014. Yes. Was that just insane to you? I mean, wow. You started this out of a farm stand in 1970. I mean, $100 million. Did you even imagine that that's what it would go for? No. 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. 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. Watching the sort of the rich and famous come to the Hamptons, you know, when you were a kid. I mean, suddenly you had a lot of money.

Like, you sort of become one of those rich people in the Hamptons, right? Well, 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 because I like the way I live. Like, I'm all about freedom and time. Yeah. You know, I can donate more and I can be more generous, which is great.

The one nice thing is, you know, I was able to buy my dream property 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 watch movies on my own TV. A lot of stuff, you know, it creates a burden. I don't want anything I can't use.

I don't want anything I have to guard. It just doesn't interest me. I mean, Kathleen, think about this for a moment. You sold this company, majority stake, in 2014 for $100 million. Riverside, four years later, sold it to Mondalese. They make Oreos and Chipsoi 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 irony of the crisis that you went through in 2000 is that without it, you would have never built Tate's. And you may not have become the kind of person who could build a company like Tate's, right? Yes, that is true. You know, 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. 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 a 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 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 kind of giving up your youth. like you had to kind of give that time up. Mm-hmm.

Given what happened and the exit and the incredible success that you saw, do you regret it? Do you regret any of that? Because I think a lot of people listening would say, no, it was all worth it. Would you say that's the case? No. I've asked myself that several times. And sometimes when I see young people working like really, really hard,

like in the corporate circle going round and around. 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 the success of this company is due to the work you put into it? You're just your relentless hard work, or do you think that it had more to do with luck? No, it's not luck. I think it was more, I worked really hard putting it together.

I never gave up. I never let its success get the best of me. If anything, and not luck, I think sometimes it was my destiny. I know Kathleen that your folks passed away recently, but they did get to see you achieve incredible success from this cooking. Yes, they didn't see the Mondalese sale, but they saw the Riverside sale. What did they think? I mean, what did your parents think? I mean, you were selling these cookies in a farm stand outside. 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, was in the paper, and they never said a word about money. Wow. Not a word. They just were like, oh, congratulations. I'm proud of you to... because that's who they were. They never once mentioned the money. My father always told me as I was becoming successful. Never forget where you came from.

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 Tate's Bake Shop. By the way, Kathleen still likes to bake. cookies at home and she loves spotting Tate's 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, pulled out a bag of Tate's, handed one to Kathleen and asked, Have 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 Rumtin Arablui. It was edited by Neva Grant with Research Help from David Jha. Our production staff includes J.C. Howard, Julia Carney, Elaine Coates, Farah Safari, Liz Metzger, and Harrison, V.J. Choi. Our intern is Catherine Seifer. Jeff Rogers is our executive producer. I'm Guy Raz, and you've been listening to How I Built This. This is NPR.