Aug 26, 2024 · 1h 17m · how-i-built-this
Insomnia Cookies: Seth Berkowitz
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of How I Built This, host Guy Raz interviews Insomnia Cookies founder Seth Berkowitz, tracing how a late-night college dorm craving grew into a nationwide, multi-million-dollar bakery empire through relentless perseverance, operational discipline, and resilience through severe financial crises.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Guy holds 34.4% of the talking time here. How this is scored →
Guy as informed peer 2.7 Guest teaching 1.9 Guest disagreement 0.3 Guy pushing back 0.6
speaking balance: gold is Guy, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 44:52 Rejecting the franchise growth model
Seth rejects the common wisdom of rapid scaling through franchising, pointing out quality collapse and failure rates in chains like Quiznos and Mrs. Fields.
Hardest push from Guy ▶ 15:50 Guy calls out retroactive corporate phrasingGuy playfully interrupts Seth to fact-check his claim that he was seeking 'earned media' as an unseasoned 20-year-old college sophomore.
Biggest teaching moment ▶ 57:11 Correcting the delivery vs retail revenue assumptionWhen Guy assumes delivery represents the lion's share of revenue, Seth informs him that brick-and-mortar retail achieved a 50/50 parity for over a decade.
Guy holds their own ▶ 1:01:41 Guy analyzes Crumbl's franchise scale against long-term durabilityGuy displays deep industry knowledge by examining Crumbl's 900-store franchise expansion and questioning its longevity compared to sustainable legacy brands.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Guy as informed peer | Guest teaching | Guest disagreement | Guy pushing back | Why |
|---|---|---|---|---|---|---|
| Seth Berkowitz's Background, Upbringing, and College Beginnings | 2 | 1 | 0 | 0 | Guy Raz conducts warm biographical inquiries into Seth's childhood in Rockland County and early college years at Penn. The exchange is friendly, nostalgic, and collaborative. | |
| Recipe Development, Dorm Baking, and Early Logistical Setup | 3 | 2 | 1 | 1 | Guy questions the logistical feasibility of starting a dorm-based delivery business before mobile technology was ubiquitous. Seth explains how basic note-taking, a cell phone, and deliberate recipe testing for warm cookies made the operation work. | |
| Grassroots Marketing, Brand Naming, and Refining the Product Line | 2 | 2 | 0 | 0 | Seth recounts the origins of the brand name suggested by his wife and the initial overly complex menu customization. Raz asks about rumors of special orders and marijuana requests in an upbeat, inquisitive tone. | |
| The Daily Pennsylvanian Article and the Sudden Order Deluge | 4 | 1 | 1 | 3 | Guy playfully challenges Seth's retrospective claim that he loved 'earned media' at age 20, fact-checking the phrasing in real time. Seth laughingly concedes the point while explaining the sudden surge from the campus newspaper feature. | |
| Teaming Up with Jared Barnett and Initial Collegiate Expansion | 3 | 2 | 0 | 1 | Guy presses Seth on monthly revenue versus weekly sales as Jared Barnett joins the venture. Seth clarifies the modest scale of initial earnings once labor and commissary costs were accounted for. | |
| Mid-Interview Teaser and Commercial Break | 0 | 0 | 0 | 0 | Mid-interview teaser, sponsor transitions, and commercial bridge; no substantive guest-host sparring. | |
| The Tasti D-Lite Co-Op Strategy and the Syracuse Launch | 3 | 2 | 0 | 1 | Guy explores the odd co-op arrangement with Tasti D-Lite at Syracuse. Seth candidly identifies this hybrid venture as one of the biggest strategic missteps in his entrepreneurial journey. | |
| Managing Multi-State Outposts and Brand Dilution | 3 | 2 | 0 | 1 | Guy notes that diluting the Insomnia brand by matching campus colors hindered early brand equity. Seth agrees, admitting that changing the logo color across campuses was a rookie branding error. | |
| Seasonal Volatility, Cash Burn, and the Yogurt Mismatch | 3 | 3 | 0 | 0 | Seth educates Raz on the structural seasonal mismatches of collegiate retail and cold frozen yogurt during summer breaks when students depart. The discussion explores early financial vulnerabilities. | |
| Urban Exploration and Jared's Atlanta Expansion | 3 | 2 | 0 | 0 | Seth breaks down the unsustainable cost structure of leasing retail stores in Atlanta and operating heavy refrigeration machinery for underwhelming sales. | |
| Founder Divergence, Creative Friction, and Co-Founder Split | 3 | 2 | 0 | 0 | Guy prompts Seth on how the diverging strategic visions between the co-founders culminated in their operational split. Seth details their late-night post-filming dispute with nuance. | |
| Pivoting to Cookie-Only Retail and Small-Footprint Real Estate | 3 | 2 | 0 | 0 | Seth details pivoting to small footprint, cookie-only stores in Champaign and Greenwich Village. Guy underscores how cutting store square footage slashed overhead. | |
| Standardizing Operations and Supply Chain Resilience | 2 | 2 | 0 | 0 | Seth explains how standardizing proprietary dough production and specialized warming ovens created system-wide consistency across new outposts. | |
| Securing Growth Capital and Assembling a Corporate Team | 4 | 2 | 1 | 2 | Guy challenges Seth on why he strictly avoided the faster-scaling franchise route. Seth explains his desire to control quality and delivery standards, pointing to the rapid collapses of aggressive franchisors like Quiznos. | |
| Mid-Interview Teaser: The Onset of the Great Recession | 0 | 0 | 0 | 0 | Mid-interview teaser setting up the Great Recession period. Guy summarizes the impending financial crisis leading into commercial ads. | |
| Personal Conviction, Spousal Support, and the Upper West Side Launch | 2 | 2 | 0 | 0 | Seth reflects on the grueling 2008 to 2010 period where investors shut checkbooks, forcing him to do physical buildouts and haul dough in personal vehicles. Raz explores his emotional resilience. | |
| The iPhone Revolution and Achieving Self-Funded Expansion | 3 | 2 | 0 | 0 | Guy highlights the transformative role of mobile apps in late-night ordering. Seth credits smartphone adoption with propelling the company toward full self-funded expansion from 2012 onwards. | |
| Disciplined Site Selection and the Shift in Delivery Dynamics | 3 | 3 | 1 | 2 | Guy assumes delivery still dominates the revenue mix, but Seth corrects him, noting retail walk-ins reached a 50/50 split. Seth also explains his initial skepticism of third-party platforms like DoorDash. | |
| Analyzing Crumbl's Viral Expansion Against Core Standards | 4 | 3 | 1 | 1 | Guy brings up Crumbl's massive viral franchise growth. Seth differentiates Insomnia's warm cookie craving model from Crumbl's aesthetic, topping-heavy presentation, questioning long-term franchise consistency. | |
| The Krispy Kreme Acquisition and Instituting Operational Discipline | 3 | 2 | 0 | 0 | Guy asks about the 2018 Krispy Kreme acquisition. Seth articulates how the corporate partnership introduced operational rigor and data discipline, helping him evolve from hands-on operator to corporate CEO. | |
| COVID-19 Pivot: Expanding Delivery Zones for Exponential Growth | 4 | 3 | 1 | 2 | Guy summarizes the legal battle with Jared Barnett over the Krispy Kreme transaction. Seth clarifies the technical legal disputes regarding ownership definitions and shares the emotional reconciliation after settling. | |
| Current Footprint, Krispy Kreme Share Sale, and Global Ambition | 3 | 2 | 0 | 0 | Guy asks Seth to evaluate his career, side projects, and luck versus persistence. Seth reaffirms his lifelong dedication to Insomnia, followed by a playful closing banter about Seth's old college phone number. |
Statements from this episode (26)
Berkowitz: Warm cookies fit delivery because they travel and reheat effectively
“Well, I think the premise used to be if you were going to deliver, it had to be something that you could deliver really well. Pizza delivers well. If it's not great, you can heat it up. Chinese food, same story. Sandwiches, it didn't matter. And so cookies rea…”
Berkowitz: Insomnia Cookies launched with around $100 in initial investment
“I think I spent a hundred dollars on, like, everything. Like, the first mixer, it was like 30 dollars, and like, the first ingredients. It was effectively no investment.”
Berkowitz: Insomnia's model relies on delivering warm cookies within 30 minutes
“The premise was always, I want to get it to you in 20 or 30 minutes. When you eat it, that's gonna be optimal. That moment in time is gonna be optimal. If we can execute against that, you're gonna order again. That was really like the whole business model to s…”
Campus newspaper feature surged Insomnia Cookies orders from five to 80 nightly
“And the phone started ringing. I mean, it started ringing at a different pace, let's say, and from three to five orders to 80 orders that night.”
Berkowitz: Insomnia Cookies did 500 weekly orders and $20K monthly in 2004
“At that point, we're probably doing 500 orders a week, 20 grand at most.”
Seth Berkowitz: Venture capital was not touching food businesses in 2004
“First of all, venture doesn't, wasn't touching food at that point, and so it was entirely friends and family we were looking for.”
Berkowitz: Focusing solely on cookie retail and delivery early on would have accelerated growth
“You know, I look back on the big mistakes I've made in the last 20 years. To me, that was like the biggest one. Because if we had set the course differently, and it just focused on retail with delivery together, the business that we have today it would have ac…”
Berkowitz: First three Insomnia locations ran inside Tasti D-Lite stores
“The first three locations were that model. Tasty light locations with insomnia cookies, some branding, and delivery service out of the back of the house.”
Berkowitz: Insomnia Cookies raised capital every year from 2003 to 2011
“Which, by the way, I did from 2003 to 2011. So, like, it was every year for eight years, I was just raising capital.”
Berkowitz: Frozen yogurt is fundamentally mismatched to seasonal college markets
“So, but like the critical flaw was that frozen yogurt really does well in summers, and college students are not there in summers.”
Berkowitz: 20% to 30% occupancy costs are tough in restaurants
“So you're talking 20 or 30%, you know, occupancy costs, which is not great in the restaurant business. Really a tough starting point.”
Berkowitz: Keeping Insomnia Cookies company-owned protected its delivery model
“I mean, I was always a believer in corporate owned just to make sure that something that was, it was a little bit novel as it related to the restaurant environment, like basically delivery as a core competency. Outside of Domino's and the pizza guys was pretty…”
Berkowitz: Food trucks were a two-year distraction Insomnia Cookies shouldn't have taken
“Vending trucks ended up being a right turn I wish I hadn't taken. It was like a two-year real distraction.”
Berkowitz: Insomnia cut staff to three and halted salary for 18 months
“And so I ended up cutting my team down to myself. And a finance associate, and we had kind of a field operator who drove around, and I stopped paying myself for 18 months.”
Berkowitz: Cookies serve as resilient small indulgences during economic downturns
“That's what we've experienced at times. I mean, it's also like, it's a nice pick me up, right? Like people just like a little sweet moment, especially in a depressing kind of environment, right? It's just, it's one of those small indulgences.”
Berkowitz: The iPhone turned Insomnia Cookies into mainstream on-demand delivery
“The iPhone was an absolute game changer. It turned us from a late night on demand business in a universe where that did not exist to being right in the middle of what everybody wanted.”
Berkowitz: Insomnia Cookies funded 120 store openings entirely from company profits
“And we then opened a 120 stores exactly like that directly from the profit of the business.”
Berkowitz: Retail sales have equaled delivery at Insomnia Cookies for a decade
“Retail and delivery, right around that point, retail reach about 50%, and it's kind of been like that for 10 years now.”
Berkowitz: Insomnia Cookies resisted DoorDash and Uber Eats until COVID-19
“I didn't really open up to the DoorDash and Ubers of the world in earnest until the middle of COVID when we had to rethink the entire business model.”
Berkowitz: In-house drivers deliver a superior brand experience over DoorDash
“Our drivers care about the insomnia cookie order, whereas the DoorDash drivers are agnostic to what they're delivering. And so there's a little bit of an ability to really maneuver and make the experience stronger, and you can't really do it with third party.”
Berkowitz: Crumbl's product is more cupcake than cookie
“I see a cupcake, I don't really even see a cookie. So, I see it, it's real, it's not nothing, but it's a different, really a very different business, and it's not something that, that we struggle with.”
Berkowitz: Rapid Scaling to 150 Stores Caused Delivery and Innovation to Slip
“Something happened internally, I don't even remember exactly what it was, where I just felt like we had had this huge growth story, you know, 20 stores, 150 locations, so rapidly, and we didn't hit a wall, but I could see something was breaking. Like, it was, …”
Berkowitz: Insomnia Cookies Met With ~60 Potential Buyers Before Krispy Kreme Deal
“We started a process trying to find buyers. We hired an investment bank and we spoke to dozens and dozens of people. I met Krispy Kreme in February of 2018. Then I met sixty-ish people.”
Berkowitz: Expanding delivery radius to five miles sparked Insomnia's fastest growth
“But we extended out to five miles from three miles, and all of a sudden we were back to normal. And growing, and adding stores and since then, it's been the fastest growth we've ever had.”