The Exchanges

Q Okay, but how did you advertise? Like, did you just put flyers all over the bulletin boards and dorm rooms? Like, hey, Seth's selling cookies. Give me a call.

A Yeah, I mean, I still have that flyer. I took a piece of paper, cut it into fours, and had these quarter sheets, yellow, blue, like orange, pretty, pretty neon colors, and really started handing out those flyers in September of 2003. And I went to the top of each high rise. There were three high rises of Penn. They're like 30 stories each. I go to the top, and I would just post it on each floor. I'd walk down, and then I'd do it, you know, two or three days a week. I'd stand on the main, on the main campus with a tray of cookies, and it started to pick up. I mean, it wasn't, you know, from the beginnings of the business, if I got five or six deliveries a night, that felt like, all right, making progress, not overly taxing, can still get my work done, and, um, that was really just kind of the first few weeks.

AI assessment note: “I took a piece of paper, cut it into fours, and had these quarter sheets”

Q Why do you think that was the case?

A I think it stems from the seasonality mostly, right? We do well in September, October, but then November would roll around, and Thanksgiving would hit, and that week that the students left campus became a struggle. Right, we'd have a great beginning of December when finals would be, and then everyone would leave for four weeks, and same thing would happen in the summer. So, like, it just was really challenging to find success over the course of a year in a seasonal college business, and that's what we were. Like, we didn't have a city store. We didn't have a twelve-month business in New York and Chicago like we do today, and we didn't have the brand knowledge. There was still so much educating. So many people were like, do I need a warm cookie late at night? You absolutely do. You just have to try it. And getting people to, to take that leap was really difficult and really costly in the beginning.

AI assessment note: “I think it stems from the seasonality mostly, right?”

Q When you saw brands like Crumble start to emerge, did you start to sort of look at what they were doing?

A I mean, I keep a very close watch on the indulgence space in general. Like, I, I watched the Cupcake Skies all through, you know, the early 2000. I watched, you know, kind of ice cream scoop shops, eh, 2015 to 2020, Jenny's and Salt and Straw. So I'm always watching the indulgence space because a craving is a craving, right? You're trying to meet a craving. If somebody's, somebody gets in the way of, of the craving that you were filling, that's difficult. So we keep a watchful eye on it. But we'll look closer. We'll look at, When are they successful? What times of day? What sort of products? Can they deliver it? Can they do it quickly? Like, we'll really digest it as it relates to really our benchmarks as a brand, and then we'll start to understand what's competitive and what isn't, and make sure that we're telling the right value story.

AI assessment note: “I mean, I keep a very close watch on the indulgence space in general.”

Q Did you have a specific plan? Like first we're going to go to Boston and then we're going to go to specific college towns. Did you know what the plan was going to be?

A I don't think we had anything close to a comprehensive plan as we needed. I mean, honestly, like we, the premise was, let's stay close. We still have to distribute the product. We need to make sure that the ingredients get to the stores, that it's, that the cookies that, that you taste in the Philly store is gonna be what you taste elsewhere. So we looked all around that area. You know, we looked at Villanova. We went up to Boston. We went over to NYU. We headed down to Baltimore, like Penn State and State College area. And there just wasn't the right type of real estate available. Like, we were trying to find kind of middle of the campus, clearly successful late night options, and there just weren't that many. And so we ended up picking University of Maryland, Syracuse University, and University of Illinois as the first three stores after Penn. And I didn't, I didn't think about bringing in the broader community. I mean, Syracuse is in a small town.

AI assessment note: “I don't think we had anything close to a comprehensive plan as we needed.”

Q Were there days where you just didn't want to get out of bed?

A No, you know, I had my first child March of 2010, so right in the middle of it, and I kind of had this feeling at that point, like, Seth, you gotta figure it out. You're seven years into this, you have a kid, like, what is it really gonna take? Figure it out. And one thing that helped us there was I opened up a location on the Upper West Side of Manhattan, two blocks from where I lived at the time. It was the first kind of, like, city-only location. We had NYU, but we never had, like, a city-only, like, a neighborhood store. And that store, I ended up building it myself. I didn't really have a ton of capital, so, like, I cleaned the store, I put down the flooring, and I had, I hired a plumber to run the sink and an electrician to put in the oven, but, like, I built the millwork and, like, really put the pieces together, painted the location, and it was a absolute home run from day one.

AI assessment note: “No, you know, I had my first child March of 2010”

Q This is a summit of your, of all your employees?

A It's all our managers and all our, our support center team. So it's a three or 400 people event. It's truly the highlight of my year. But I remember going through I went through, like, the details of how to get delivery times down from 40 minutes to 30 minutes, how to do it step by step, and it was such hard work. Like, the system had gotten so big that the type of work we were trying to do was, it just, I felt like I was a roll your sleeves up operator entrepreneur who needed to morph into CEO, who could understand how to Really rely on others and trust others to build the brand with me. And I just wasn't in that place. I recognize I wasn't in that place. I'm like, I need help or I need to exit. Those are really the two options. Um, and 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. Um, and then at the end of the process, they were standing there with us. Uh, shoulder to shoulder. And, and they were clear with me from day one, like, Seth, we're only doing this if you're still here. Like, you know the story, you know the experience. And they really helped me re kind of rethink the whole thing.

AI assessment note: “It's all our managers and all our, our support center team.”

Q the one hand, the business is doing okay, but the challenge is that you're not going to be able to You're still anticipating losses, and you, you knew that you, your investors had sort of turned off the spigot, and so what did that mean for the future viability of the business? Did you, at a certain point, did you start to lose faith that this was going to work?

A I did. I really, this, this was the point where, I mean, first of all, I didn't know what to do. Like, I had no other, I don't have any other experience, right? I'm a, I've been a cookie entrepreneur for 21 years, right? It's all I knew, and so the idea of what was my next career path, And it's the middle of the recession. Like, it felt like the only option was to move forward, but I had very little confidence. And, you know, I had continuous conversations with my wife, like, I don't know what to do. This isn't working. Once she said, like, maybe we should throw in the towel. And I was like, no, no, no, I'm not doing that. And then there was another time where I was driving cookie dough somewhere in the middle of the night, and I called her, and I was really frustrated, and I was like, oh my goodness, like, I'm peddling cookies through the Midwest, like, at two o'clock in the morning, like, how did I get here? But she said to me, like, you've believed, you know, you believe in this. You do. You've been doing it for 10 years. I believe in you. Do what you gotta do. Like, go make it happen. She stood behind me through all of this.

AI assessment note: “I did. I really, this, this was the point where”

Q So how many years before you were able to attract capital again? Was it a year, two years?

A It was by, I think, two years. The world was getting better. The financial world was certainly improving. Our business was improving, and we were getting closer and closer to break even. And I sat down with a new potential investor. I remember he turned to this good friend of mine who'd given me office space, and I'd sat with a couple years. He's like, you got to cut another check into these guys. Like, they're there. They're right there. And that conversation, by the way, was huge. There's been moments where I'm like, thank goodness these happened. That's one of those moments where this person I had really never met before convinced one of my most trusted investors to cut one last check. And that was the last check we, we ever, it was ever cut back into the business, you know, for like really seed money ever again.

AI assessment note: “It was by, I think, two years.”

Q And so they purchased about 75% of the company in 2018 for a hundred and forty million dollars. Amazing. What did that enable you to do now that you were part of the Krispy Kreme family? Like, did it change You know, efficiencies, and, and how you distributed, um, supplies, and I mean, what did it enable you to do as a business?

A I think the part that was so helpful is that, one, they helped us think about the brand, why we were successful, and how to tell that story, so delivering the warm cookies, being value-oriented, but also driving a business. This is going to sound kind of silly, but, like, over the years, I was so desperately trying to get to a sustainable place by growing that I sometimes lost sight of what The business itself needed to look like to be successful. So they kind of, Help me thread discipline through it. Like, financial discipline back into Insomni, making sure that the decisions we made were helping the business and the organization grow in tandem. That's where I kind of got lost, and as I told you the story today, going through the 15 years that preceded this, a lot of the decisions I made weren't about discipline, they were about hope. They were about, I hope this works out, I hope this truck works.

AI assessment note: “Help me thread discipline through it. Like, financial discipline back into Insomni”

Q So you were, you continue to believe in this vision of cookies. Tell me what kept you going. I mean, why were you believing in this vision when a lot of the evidence suggested that maybe it might not work?

A I'm not a hundred percent sure. Honestly, the demand of warm cookies wasn't really sufficient to keep going, but people seem to really love it. And so I was like, all right, there's an education element here. I haven't gotten the model right yet, but as we started to tweak it, I started to tweak it at this point. There wasn't really anyone else. And we had this Illinois location and the Penn location. They were starting to make money. And I was opening in Cornell and Binghamton and kind of a small co-op location in New York. They were doing okay. And so, ok for me was enough to keep going. It wasn't clear that it was all gonna, all gonna add up to something that was great in the end, but if there's some brand love, that's kind of hard to find, and so we're building it over time, and as you start to take away some of the distracting elements, take away the yogurt, focus on the core business, focus on the core Insomniac, who was that college student, and just get better at delivery, make sure the product tasted better each and every day, There was some clarity that that can grow into something bigger, and I started to just believe it, and honestly, if you said, Seth, maybe you were just delusional, I'd have a hard time arguing with you.

AI assessment note: “people seem to really love it... ok for me was enough to keep going.”

Q Did you feel more confident at that point, or were you still, you know, vigilant about what could happen given what you had seen in the previous few years?

A I have some healthy paranoia. I never trust that insomnia is safe. I mean, honestly, like, I'll look at sales in a given day, in a given hour, and if I see it going in the wrong direction, I start to get, I try to, I course correct. You know, I'm, I'm constantly course correcting. Uh, I think it's being forged out of crisis, right? Like, becoming an entrepreneur in a business that took 20 years to get here, and all the struggles of financial crisis, and all the pivots and model. Yeah, I don't, it'll, it'll be very difficult for me to ever get to a place of comfort and complacency. It's just not, it's just not who I am.

AI assessment note: “I have some healthy paranoia. I never trust that insomnia is safe.”