#066: Famous Amos – We hope he made $100M in the last sale

Wally Amos built, sold, worked for, and quit. He got brought back and might have got a return on the final sale just because he liked baking cookies.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is … Well, it’s us, but we’re highlighting ads we’ve written and produced for our clients, so here’s one of those.

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Dave Young:

Welcome back to the Empire Builders Podcast. I’m Dave young, and I’m alongside Stephen Semple. And Stephen, you got the story today of another cookie guy, another famous cookie. This one’s really famous.

Stephen Semple:

Totally.

Dave Young:

Totally famous. Famous Amos.

Stephen Semple:

Famous Amos. Yeah. So Famous Amos Cookies was started by Wally Amos on March 9th, 1975 on Sunset Boulevard in Los Angeles. And here’s what’s really interesting. It is the first, it was the first cookie store in history, and this story is… There’s a lot to it. There’s success. There’s decline. There’s return. There’s so much going on here that I really don’t know what to say other than it’s really interesting journey that we’re going to go on.

Famous Amos Store

Dave Young:

Lots of chapters in the Famous Amos story. When you say the first cookie store, like all the others were just like a bakery where it was other things besides cookies? Cookies, they also had.

Stephen Semple:

Right. Yeah. This is the first one where it was just cookies and that was it. It even predates another podcast we did, which was Mrs. Fields’ Cookies. It even predates Mrs. Fields by a couple of years.

Dave Young:

Okay.

Stephen Semple:

Yeah. So first cookie store in history, and it’s a really interesting journey because Wally went to school to study to be a secretary.

Dave Young:

Really?

Stephen Semple:

Yeah, and the first job he got was in the mail room of the William Morris Talent Agency, which is one of the top talent agencies in the world. He worked his way up, and he became the first black talent manager. First one, so he was really groundbreaking on that. And he reached a point where he decided he wanted to leave the agency and set up his own agency to manage his own clients, but this new agency he started was really struggling, and he would go home at the end of the days and he’d feel frankly depressed, and he wanted to feel good about things. So at the end of the day, he would go home and he baked cookies at night. And he’d baked these chocolate chip pecan cookies like his aunt made.

Dave Young:

As one do.

Stephen Semple:

And he really did this to self soothe. It was never a business idea. It was something he did to make himself feel good.

Dave Young:

Just made some cookies.

Stephen Semple:

Made some cookies and he’d bring them back to the office. And when clients were in, he’d give them to clients. And one day light goes off. He said, “The one thing that makes me happy is making cookies. Why don’t I start this as a business?” He gets on the phone. He calls old clients. He gets an investment from Marvin Gay and a bunch of others. He raises $25,000 from these well known musicians and decides I’m going to start this business. So in March of 1975, he opens the first shop dedicated the cookies in the world called Famous Amos Cookies.

Dave Young:

Famous Amos Cookies.

Stephen Semple:

Yeah.

Dave Young:

I love the fact that the cookies were a form of therapy for him. I mean, it’s like a Ted Lasso moment, isn’t it? It’s…

Stephen Semple:

It sort of is. Yeah. Yeah. And so he opens it up in this highly visible location in Los Angeles on the seedy, because at the time very seedy Sunset Boulevard was full of runways and sex workers, but a lot of traffic. He decides he wants to promote the cookies like he would a client. He understood celebrity and talent and building crowds, so he treats us like a Hollywood premier. He invites 2,500 people, plus all the famous people he knows. The opening is so busy, it stops traffic.

Dave Young:

That’s fantastic.

Stephen Semple:

Yeah. And as I said, this was the first high-end cookie store, predated Mrs. Fields by a few years. And for a time, Famous Amos is the gold standard in gourmet cookies. He constantly sells out, but he’s not real good at financial or business management. He’s great at promotion. The cookies are excellent. Management, not so much.

Dave Young:

I remember some of the PR. I remember seeing him interviewed maybe on PBS. I’m not sure where, but he was famous for cookies. Like, he’d get himself on talk shows and game shows and all kinds of things, right?

Stephen Semple:

He really was the first celebrity baker in terms of getting on all of these TV shows and was really great. And look, things started to take off in LA. He was selling 300 pounds of cookies a day, and it was this cool, hip thing, and there was lots of walk-in and word of mouth. And he started to sell them in select grocery stores in LA. And he expanded to three locations in the first year. And he starts doing like $20,000 a month in sales. But again, he was this great promoter, really great promoter…

Dave Young:

But not so good with the finances.

Stephen Semple:

Yeah. ’77, 2 years after opening, Macy’s comes along and they say, “We want to do your cookies.” And further to the promotion Famous Amos Cookies was featured in the Macy’s Day parade for like seven years. They were like in the forefront of that parade. So along comes Macy’s. It’s more demand than they can meet, but it’s also more exposure, more sales, and he needs to open a second factory to meet demand for these cookies. And now, revenue is like $5 million. He starts getting a little overextended because at the same time, Bloomingdale’s, Neiman Marcus, Marshall Fields, they all want his cookies. So he gets overextended and he decides to bring in investors. So he sells off little bits of pieces of the business. And the business ultimately becomes worth $60 million. But before that happens, Wally Amos is forced to sell off his remaining stake for about $1.1 million.

Dave Young:

So it’s still Famous Amos Cookies, but Wally’s no longer an owner.

Stephen Semple:

He can’t even use his name or face for any other ventures, and the new CEO, Keith Lively, takes over it. And it’s kind of interesting when this happens. Remember Prince? Yeah. Remember when Prince, the musician, went through this little stage where he was The Artist Formally Known as Prince because his name was actually a symbol. That was all a trademarking thing. Prince was wanting to get out of a deal and his name was owned by a recording studio, so he decided to record under a different name, but he decided to do this symbol, which forced everyone to refer to him as The Artist Formally Known as Prince.

Dave Young:

But they’re still saying Prince.

Stephen Semple:

Right. And what the record label was not going to do is sue the record station for that, but back to Wally. Back to Wally.

Dave Young:

Yeah, back to Wally.

Stephen Semple:

Professor down, the new CEO comes along, and he decides to lower the quality and lower the price to meet mainstream, and Famous Amos Cookies becomes just another store bought cookie, and Wally Amos gets really sick of what’s happening. And in fact, he walks away from the business, walks away from the entire thing, leaving his $200,000 a year salary. He says, “I’m done.” And by now, the cookies are just another mass produced snack and the brand image is down, but Keebler decides to buy it. Keebler comes along and buys it for $61 million, and he sees none of this, but the brand image is down and Keebler wants to change things. So they sit down and they meet with Wally Amos, and they want Wally to be the spokesperson again of the cookies, and he says, “No.” They’re like, “Come on Wally,” and he says, “Okay, but only if the cookies return to the old quality,” and Keebler agrees to that, and there’s an undisclosed amount that they pay Wally to come back and work with them.

Stephen Semple:

And they rebuild the brand, and in 2019 Famous Amos is bought by the Ferrero Group for $1.3 billion, and it’s rumored that Wally made $100 million from that deal.

Dave Young:

I hope he did.

Stephen Semple:

I really do too.

Dave Young:

I hope he made more than that.

Stephen Semple:

I really, really do. Yeah, ’cause I admire him for walking away and I admire him for holding to his guns when Keebler came back and he said, “No, I’m only going to do it if you make it the thing that I loved.” It really shows his passion for it, so I do too. I hope that he was able to cash out because he went through a period of time where, look, he walked away from the salary and he couldn’t even use his name or his face on any new product that was owned by the folks that bought him out.

Dave Young:

That’s just crazy. There’s a cautionary tale here, and I’ve always felt businesses that need investors to get them off the ground… I mean, I understand there’s some that you just have to do that. If it’s technology driven, you’ve got some invention that you need to get off the ground that takes a lot of capital to even make it, that’s one thing, but so often the people that have the heart for it, the entrepreneur, the inventor, they get lost in the shuffle when the investors take over.

Stephen Semple:

They certainly can. And one of our partners, Gary Bernier, has got a great phrase and I’ve heard him say this to numerous businesses… Because, let’s face it, this is what we do. We grow businesses, we create empires, so we’re all for growth, but growth is great. Growth sucks. It really is both. And one of the things that becomes very important is growth and cash flow are very intermingled.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

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Dave Young:

Let’s pick up our story where we left off and, trust me, you haven’t missed a thing.

Stephen Semple:

After the people that sit there and say to me, you’ll look at these companies that… these really fast growing companies that are on the stock market and they’re losing tons of money and everybody goes, “Well, why are they worth so much?” Well, they’re worth so much because really, really rapid growth costs money because you’ve got to build your infrastructure to what you need in the future, and then you have to fill that infrastructure and ultimately profits come. Now, you can scale that growth back a little bit and be a little bit more patient and manage it from cashflow. Like, so for example, when Macy’s came along, that was great. When Bloomingdales, Neiman Marcus, and Marshall fields came along, maybe you had to say only yes to one of them, no to two of them.

Dave Young:

And you know what? It’s got to be worth a little bit more to the one you’re saying yes to if you tell them, “I’m going to say no to everybody else.”

Stephen Semple:

Yes. Yeah. There are many ways to skin a cat and one needs to be keeping an eye on cash flow, on how much money is coming in versus how much is going out to make sure that at the end of the day you have a business that is healthy. And yes, and sometimes what happens with guys like Wally, really what they needed is they needed internally a person who was good with the numbers and listen to them.

Dave Young:

To help them understand the importance of cash flow, the importance of balancing it with growth. Yeah, it would’ve been cool if he’d been able to do that and have the big sell off and keep 100% of it. We talked about some big, big companies that are privately held, and that’s always kind of a beautiful story.

Stephen Semple:

But here’s the thing I really admire about… So that’s the cautionary side, but the plus side that I love is way too many businesses get caught with, “I’ve got this great product,” and they feel this frustration of being what I like to call the world’s best kept secret, and what he knew was you got to go out and promote it. He had a promotional strategy at a grand opening and he got on TV. There was lots of things. Now granted, that was his world, but what he knew was whatever that strategy is you need to have a promotional strategy. If you don’t do that, the world will not beat a path to your door, so he understood that part.

Dave Young:

He was creating that desire long before most of us across the country ever experienced a Famous Amos Cookie. Honestly, Stephen, to this day I don’t know if I’ve had one. I couldn’t tell you. But what happens was with that kind of promotional mindset is you build this little place in everybody’s mind that says, “I like cookies and someday, someday I hope to have a famous Amos Cookie. If I ever get to LA, if I ever get to Bloomingdale’s,” or wherever. It becomes aspirational almost. I mean, that seems silly for a cookie. We think of watches and cars when we think of aspirational, but you can do that with something like a cookie.

Stephen Semple:

Sure you can, and that’s often why it can become a big mistake when you drop the price on something like this. Because the moment you drop the price, you’re also forced to drop the quality, which makes it not special. But even if the quality is there, there’s an element of it not being special if the price is the same as everybody else’s. There’s an expectations when you walk into one of these higher-end stores and you’re buying this thing that, A, it’s going to be awesome, yes, it has to be awesome, but, B, there is an anticipation that you’re going to be paying a little bit of a premium price. We’ve seen that over and over again. His love of his product also really came through, and I also think that’s part of the reason why his promotional strategy worked really well is he very clearly loved his product.

Dave Young:

Yeah, it was unique and he was unique. He was a good storyteller. We just obviously love sitting down talking about those cookies.

Stephen Semple:

He really, really did. So it’s a cool deal, and I really, like you, hope he got that cash out of money at the end because he certainly deserved it.

Dave Young:

All right. Well, thanks for sharing the Famous Amos story, Stephen.

Stephen Semple:

Well, and we should all feel a little more famous sharing in it.

Dave Young:

Yeah. Yeah.

Stephen Semple:

Thanks, David.

Dave Young:

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