Lessons from the Golden Krust Caribbean Bakery

Since then, the business has grown into a successful franchisor with locations in Atlanta, Boston, Philadelphia, Los Angeles, and other places, and system-wide revenues of more than $100 million. He has created more than 1,000 jobs in the process.

Here’s his story:

Hawthorne moved from St. Andrews, Jamaica, to New York in 1981, determined to start his own business. He attended Bronx Community College and got work as an accountant with the New York City Police Department. At the same time, one of his brothers—most of his siblings also settled in New York—started working for a West Indian bakery. That experience provided some valuable insights: Bakeries catering to the West Indian market distributed their fare as wholesalers, instead of setting up shop in areas close to customers and selling directly to them. And they were unaware of just how large the Caribbean population in the U.S. had become. Check out our Resource Channel for immigrant population demographics by state.

Hawthorne realized he had his business idea: Start a bakery focusing on a market he knew well—fellow Jamaicans who had moved to New York—and sell food that was popular at home but hard to locate in their new country. Hawthorne was confident his fellow Jamaicans would flock to a store that sold well-loved, difficult-to-find delicacies. Just as important, it would be in a neighborhood where many of them lived, and it would have a comfortable, friendly ambiance and evoke memories of sun-drenched beaches and the blue Caribbean.

Eventually, Hawthorne could branch out to other neighborhoods with large Jamaican populations, in places they either lived or worked, such as areas near hospitals, where many were employed as nurses. “The philosophy was to take the same concept my parents had turned into a success and replicate it here,” he says. Hawthorne took a leave of absence from his job and, together with his siblings, set out to launch a company.

But funding was hard to come by. Banks weren’t interested in taking a chance on an untested bakery setting up shop in the Bronx that catered to West Indian immigrants. Instead, Hawthorne and his siblings mortgaged their homes and tapped their savings, raising about $100,000. With that, they were ready to get down to business.

By the end of the first year, Golden Krust had made $100,000 in sales, opened another bakery next door to handle delivery routes, and expanded to New Jersey. By year two, the company had five locations and $1 million in sales. Four years later, now a proven success, Hawthorne was able to get a $1 million bank loan to open his own manufacturing facility.

Further fueling his success was a string of major contracts with several New York City agencies. First came an agreement to supply food to the prison at Rikers Island. Then he signed a catering deal for the New York City school system. After that came more contracts: with the school district in Mount Vernon, N.Y., and the Rockland County, N.Y., prison system, among other institutions.

At the same time, Hawthorne researched the market to pinpoint locations for expansion—areas where a critical mass of Jamaicans lived and worked. By 1996, Golden Krust was operating 30 locations, opening another production plant in Fort Lauderdale.

Hawthorne began getting more and more requests to start selling franchises. In 1996 he decided to take the leap. “So many people were knocking on our doors, we became a franchisor by default,” he says. But the move required a significant effort. Hawthorne learned that, to be a successful franchisor the company had to:

1. Create a system and operation that franchisees could easily reproduce.
2. Centralize its manufacturing facilities. In 1996, Golden Krust opened a 60,000-square-foot plant in the Bronx, funded by $1.2 million in loans backed by New York City. Information on NYC incentives.
3. Make all its stores, both company- and franchisee-owned, uniform in design and look.
4. Change its stores from bakeries into restaurants by offering freshly cooked Caribbean take-out meals in addition to its baked products.

In 1996, Golden Krust Bakery became the first Caribbean-owned business to be granted a franchise license in the U.S.

Finding prospective franchisees wasn’t a problem; many of them were customers—in particular, nurses—who worked in neighborhoods where Golden Krust Bakery stores were located. The nurses proved to be a perfect fit, since, according to Hawthorne, they tend to be hard workers, interested in following rules, and good at providing customer service—all attributes of effective franchisees. By 1999 the company had 35 units, 24 of them franchise stores.

By 2003, Hawthorne realized that the company needed to add more seasoned management, especially executives with franchising experience. To that end, he hired a handful of managers, including a vice-president of franchising and a director of franchise sales and development. The company also signed a deal with Pepsi USA, through which the corporation, based in Purchase, N.Y., agreed to install soda fountains in all Golden Krust locations and provide marketing help.

Since then, the company has continued to grow, with 120 franchise locations in nine states. Now Hawthorne is in the middle of the next phase: expanding into making and selling Jamaican-style sauces. “Golden Krust has tremendous brand equity,” he says. “We want to capitalize on that.” He’s also started to groom his four children to take over the business. “My job is take it to a certain level. Their job is to take it to the next level,” he says.

Hawthorne has formed an ambitious plan for the next 10 years: extending the brand to an entirely new population—non–West Indian consumers. Branching out to other consumers may mean introducing some fare recalibrated to be more familiar to the mainstream U.S. market. But, according to Hawthorne, he still intends to offer only food with an authentic Jamaican taste. In addition, Hawthorne has his eye on international expansion, moving to cities with large West Indian populations, such as London, Bristol, and Manchester in the U.K.

From a small bakery in the Bronx targeting West Indian immigrants to an international franchise serving a global audience: It’s an ambitious goal—but not unrealistic, in light of everything Hawthorne has accomplished so far. “You have to seize the opportunity,” he says. “You have to seize the moment.”

Produce and sell well-loved staples from “back home” to your fellow countrymen/women. The advantages are:

• You have got an instant market that’s familiar with your product.
• You understand the market’s tastes, buying triggers and culture.
• No competition from large-scale American producers, who typically focus on the mainstream market and see fragmented ethnic markets as too small.
• Opportunities to expand outside of your own ethnic market by selling to the “mainstream” American market or creating a brand-new product by “Americanizing” the original.

Here are two great examples of immpreneurs who’ve succeeded in the U.S. by doing just that:

And it’s not just foods that you can bring from home. Click on the link below to learn how a British couple imported an idea from the U.K. and created a $19 million company:

When Lowell Hawthorne and his siblings launched Golden Krust bakery there were already more than 200 Caribbean bakeries in New York City. To be successful, the Hawthornes knew they had to offer something better and different. Their strategy was to:

• Produce high-quality, competitively priced products.
• Sell directly to their customers—many Caribbean bakeries in New York sold to third-party wholesalers.
• Invest in designing and building a uniform look for their stores that was inviting and customer-friendly.
• Laser-focus their sales efforts by positioning their bakeries and stores in neighborhoods where large numbers of their best prospects—fellow Jamaican immigrants—lived and worked.

“Banks weren’t interested in taking a chance on an untested bakery setting up shop in the Bronx that catered to West Indian immigrants. Instead, Hawthorne and his siblings mortgaged their homes and tapped their savings, raising about $100,000.”

Lending institutions are far more likely to lend once you have a track record of success:

By the end of the first year, Golden Krust had made $100,000 in sales, opened another bakery next door to handle delivery routes, and expanded to New Jersey. By year two, the company had five locations and $1 million in sales. Four years later, now a proven success, Hawthorne was able to get a $1 million bank loan to open his own manufacturing facility.

Golden Krust bakery really took off in the 1990s, when it won contracts to supply food to the prison at New York’s Rikers Island and the New York City public school system. In 2010, the New York City Department of Education spent $140 million on breakfasts and lunches for pupils and staff. In the same year the New York City Department of Corrections spent approximately $20 million on food for inmates.

For more on how to win government contracts read “How to Win Government Contracts“

Sources: New York City departments of Education and Corrections, 2011.