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Half a million pounds of flour a day. What does that mind-boggling stat indicate? For Joseph's Bakery, it means that it has completed another daily circuit of deliveries of fresh-baked pita, wraps, lavash, and other flatbreads to some 1,000 stores in New England, and freshly frozen batches to 10,000 grocers across the nation, including Wal-Mart, Publix, Harris-Teeter, BJ's, and more.
Founded by Joseph Boghos in 1972, Joseph's Bakery started manufacturing pita bread in a small Lowell, Massachusetts bakery. Today, Joseph's is nationally known for producing a wide range of high-quality baked goods in its 110,000-square-foot facility in Lawrence.
New family blood spurs growth
Joseph’s experienced steady, yet modest growth for its first two decades in business. In the mid-1990s, things really took off when Joseph’s son, John, joined the company.
“He really opened up our distribution channels,” notes John Boghos’s son, Stephen Boghos. “He’s the one who opened the doors of Shaw’s, Stop & Shop, Market Basket, and other well-known stores in New England. Then, around the year 2000, when the South Beach and Atkins diets took off, he pushed the development of lines of low-calorie, low-carb, high-protein flax, oat bran, and whole wheat pita breads. That’s what got us into Wal-Mart and becoming a national player. And we’re widening the gap on our competition every day.”
John’s other sons Joseph, 30, and Stephen, 28, have been involved with the bakery for most of their lives and took on greater management roles after their father retired in 2012, with Stephen handing sales and Joe taking on more operational responsibilities.
Building toward a buyout
The brothers have their own vision, including building on John’s mission of bringing an increased level of professional management into the firm. To begin the process of casting Joseph’s in their own mold, they decided to buy out their grandfather’s two long-time business partners.
“While our grandfather oversaw the overall operations, his partners Joe Ganem and Leo Guggenheim ran finance and R&D, respectively,” says Joseph. “They worked well together for 25 years and continued to be a big part of the company’s success after my dad came in and really exploded our sales.”
Much of what drove the decision regarding the buyout was a combination of generational differences and timing.
“As third-generation owners, we wanted to learn everything we could from Joe and Leo, and take our time learning,” said Joseph. “But we also knew that, at some point, our perspectives would differ, and we would want to put our own stamp on the Joseph’s name. Leo is 86 and Joe is 77, so our views on growth and the organization would naturally differ.”
That point came in 2013, when the Boghos’s decided to buy their partners out. Fortunately, when they approached their partners, everyone agreed that a deal could be done, provided it worked for the company and its 250 employees. In fact, says Joseph and Stephen, it was Ganem, who transitioned from business partner to “grandfather” at the close of the buyout, who helped push the transaction the hardest.
“He has a unique ability to kind of cut through the minutia and just get down to the most important facts on the table,” says Joseph. “He worked to put the emotional and personal differences aside and get a deal done that had us shaking hands and walking away as friends, all the while positioning us for future success.”
That said, it wasn’t an easy process. Given the needs of three different partners and the desire to balance employee and growth needs, the buyout took nearly three years to complete. With guidance from their bankers at Salem Five, the team went through seven different iterations of the deal before agreeing to terms that worked for everyone, including payouts everyone deemed fair and equitable.
Fortunately, Joseph says, they had a solid partner in Salem Five to help guide them through the process. After vetting five different banks, they found Salem Five to be “a very different animal than everybody else on a number of different levels,” he says. “Their ability to communicate and understand our goals were really like none other and we had access one-on-one access to their decision-makers that you’d never see at another institution, and that access and guidance were huge.”
“Salem Five was the bank that really made us feel like they were investing in not just the numbers or the company, but really the people in the company,” Stephen opines. “They looked beyond our bottom line and historical numbers, and made us feel like they believed in our team. That was a key differentiator in our choosing Salem Five.”
Up next for Joseph’s
Now firmly in control, the brothers acknowledge that they’re taking on risk on behalf of themselves and the entire organization, but that they’re looking at changes designed to serve the company in the long term.
“We’re not planning three to five years out, we want to make changes that ensure the company’s success 50 years from now,” Stephen relates. “We know the potential we have in this business and our people, so we’re going to provide the systems we need to continue what our grandfather started.”
To get there, the Boghos’s have already made investments in people and technology that would help free them up to plan for growth. For example, Joseph’s Bakery now has a general manager for the first time in its history and it’s beefing up leadership on the line production side as well. In addition, Joseph’s will soon pull the trigger on ERP and CRM systems designed to give it greater insights on its own numbers and customer data, with the goal of giving management the ability to maximize decision-making capabilities.
“We know that the changes we’re making may be difficult on a cultural level,” relates Joseph. “A lot of people look at Steve and I and say, ‘Hey, things are going pretty good around here. Why are you trying to change things?’ But we’re of the mind-set that there’s always room for continuous improvement and if you’re not doing that, you’re stagnating, and your competition isn’t. If you’re not growing, you’re eventually gone.”
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