Purpose Interview: Matt Kreutz of Firebrand Bakery
Matt Kreutz is the owner of Firebrand Artisan Breads in Oakland, CA. Camille Canon (Executive Director of the Purpose Foundation) sat down with Matt in March 2021 to talk about his background, the vision behind Firebrand, and the company’s transition to a stewardship model. And baking, of course.
Can you give us a bit of background for Firebrand? What’s the company’s mission?
Firebrand is a mission-driven, artisan bakery located in beautiful Oakland, CA. Firebrand’s mission is to create a more just and equitable workplace, shared value, and thriving communities through the craft of baking. We began in 2008 and operate a wholesale and retail bakery/cafe in Uptown Oakland.
How did you get into baking?
When I turned 14, I needed to get a job. In Virginia, you need a work permit at that age. So, I went to the principal’s office to get one and got a job at a place called Bagel Buddies. At first, I wasn’t baking but eventually started boiling the bagel, making cream cheese, stuff like that. I eventually started working at bakeries, but that was my early start in the foodservice industry.
What does your typical day look like?
I’m typically up by 3 am, go work out and be back and ready to work by 5:30. I work until my daughter wakes up around 7, spend time with her until around 9, then head into Firebrand. I usually work there till around 2, then back home by the time my daughter wakes up from her nap. We hang out as a family till around 7 when my wife puts our daughter to bed. I work until around 9, then pass out. My time and workload are extremely structured and regimented. I have a strict priorities list and I block all of my time around that so I don’t waste any time in my day. My phone’s going off all day and night as the bakery is 24/7, so there’s no real “off-time”, but I structure it so it works.
Employees are central to your company’s mission. What role do they play in business and vice versa?
As part of our transition to steward ownership, we’ve been examining this question a lot. We’re working on building more pathways to leadership for employees that don’t rely on management positions. We’re also building out our Open Book Management training as a key pillar of employee participation in the business. We want all employees to be trained on how to read the financials, but more importantly how to tie their everyday jobs and decisions to improve the financial goals of the company. This in turn creates more profits, which can go right back to them as part of our profit share program.
We think of ourselves as a people-first company, meaning all of our decisions need to not only serve the business but serve our people as well. They are our key stakeholders in the business and we have to make decisions that make them want to be at Firebrand for a long time. The average tenure at Firebrand is currently 3 years and we’re really proud of that.
How are you thinking about creating sustainability in the foodservice industry for your employees?
I think this was pretty humbling just to understand that we need to better understand everybody's needs. What's good for one person is not good for another, and then how we think about that became important. I think you have to start with wages, but it can’t be where you stop. It cannot be the end-all-be-all of what we offer or what we do just because we are in a slim margin business. I think we’ve come to a point where we can provide a good wage. But what are the other things that are involved? How do people show up to work and bring their whole selves? Commuting, health care, child care, training, professional development, etc. all go into it. We have to take a more holistic approach to our outlook and understand the needs of all of the employees and not make those decisions so top-down heavy.
We have a duty and obligation to create new leaders not only at Firebrand but in our communities and we do that by investing in them and their development as people, not just bakers.
What was your thought process as you approached this question of employee inclusion?
We wanted to be able to add value to our employees and make sure that if we win, they win. That it doesn’t have to be an us vs. them mentality, that they’re our key stakeholders. We thought that, for our team, owning small shares in Firebrand wasn’t as much of a big reward, rather, how can we do more to have them have more of a say in how things are run to financially benefit them? We approached this by integrating the Open Book Management training into a professional development plan that was directly tied to our profit-sharing program. This gave them direct, on the ground knowledge of the company’s financials and how to move the needle and be rewarded through profit sharing. So, they not only get the shared profits but also can help drive that number up.
We also wanted to look at governance and how we open up the board and add more transparency to the company. It’s important for me that employees are aware of all the decisions that are being made and can actually comment on them or help make them.
How did you land on steward ownership? Did you explore other models?
Steward-ownership was a way to align our financial planning, governance, and mission all in one legal structure. This allowed us to marry all these issues together into a stakeholder model, with our employees as the key stakeholder. This has made our mission the priority and the purpose of the company has to feed through all avenues of the business legally now. Steward-ownership also means that Firebrand will always be 100% independent and can never be sold, that was really important to me. So that if we scale and become really successful, the employees win the most.
We did explore other alternative ownership models, but given our goals and employee base, we felt that steward ownership was the best model for us. I wanted something that legally laid out all of our purposes and then gave us a legal obligation to serve them. That we defined them and how they are carried out and we would own that.
How did you come to the conclusion that the conventional financing/business path may not be right for Firebrand?
We moved into this new location and went from 26 to 52 people in a week and a half. We had a backload of opportunities. Going from one space to the next, we turned the lights off at our old space and turned the lights on here with no gap. A year and a half in I got worked out of a job, essentially. It turned into “now you have to be the boss, you have to be a CEO.” And I remember thinking "What the f*** is that?”. I really had no clue what that was. I literally had to learn a new job structure. I had to understand what a CEO does and ask myself “How do I fit in here? How do I get the skills to be better at that?” and then talk to people who do it better than I do and then try every day to fit into that role and responsibility.
So, those decision points in our growth were ones I had to be comfortable with from an ego-perspective, from a business perspective, and from an identity perspective. Once I crossed that threshold of acceptance though, we were still growing and wanted to do so ethically.
I also understood that the big decision was that I am not going anywhere. We were not going to sell the company. At some point three years ago we knew we would be raising money soon, but that I would not be selling the company. When that came up, people asked "What's your exit strategy?" My exit strategy is that I built this, you exit, and then I keep going. Firebrand has never been a cash cow for me. I never thought of Firebrand that way and I never wanted to sell it.
What were you looking for in investors? And what was your experience raising capital within the trust structure?
I was super clear at the beginning that we wanted someone to be active, we wanted a partnership. We didn’t want dumb money, which means that we got smaller checks and we had seven parties in the room - debt and equity - that was a lot of relationship building. The overall experience was really positive, it for sure took a lot longer, but in the end, we got really great support and a bigger team out of it.
Part of why these transactions end up being more relationship-oriented is because the terms are co-defined by everyone. It's not like you are showing up to the table saying "Cool, here is the term sheet and it's going to be x return over 5 years..." You are really having a dialogue around what is the appropriate risk-return profile that will not extract from all of the good things that this business does, but also is risk-adjusted for investors. That’s a nuanced conversation that I think requires trust to build between people.
But it's a decision and it's fantastic and it's right for Firebrand. I think it marries the trajectory of where you see businesses going from your social responsibility statement era of corporations to where they are going to be in ten years. This trust model really kind of marries all of those things: your legal structure, your operational structure tied to your mission, its deliverables in it; so you as a company are actually delivering that shared value you're professing about or got a B-Corp certification for or whatever - you are actually doing them because you legally have to. It is just ahead of the curve of where these businesses are going.
How was the round structure in the end?
The investment was structured similarly to a restaurant flip model where investors get 90% of distributed profits until they achieve 2X their initial investment. At that point, it flips into being distributed pro-rata based on ownership. Employees are included in the distributions from Year 1 with 10% and then on-going as a shareholder via the trust.
I think you and other folks that we are working with are really carrying a load to be the pioneers of a new model of what business can be and how they can operate. And also, frankly, how community institutions can look in the 21st century.
When I think of Firebrand, I think of your community institution - as much as you are a bakery and you are using the model of business to be that, you are also deeply integrated and have clearly put skin in the game in terms of your commitment to those values.
Where can we expect to see Firebrand in 10 years?
I would like to have about 150 employees, 75 or 80% of which are formerly homeless or incarcerated, a higher participation rate in the 401K program, 50 to 60% engagement in the financial management meetings, healthy profit sharing to everybody. The open management program is running really well and people are really engaged in it. I’d like us to be a one-job employer, that'd be really fantastic - really good benefits, strong involvement in the community. I think it would be nice if we could be that community space as well as having non-profits be involved, literally coming in and out of Firebrand. So that we are actually useful not just as a business but as a valuable space as well. I also hope that we can help lead a new group of entrepreneurs hoping to do something different, involve their communities, and add tangible ways to add value - back into people and those kinds of models.