He Built a French Bakery-Café Empire

Ladies and gentlemen, today I have Thierry Bey. He's the CEO and founder of Bäckelstein, a well-known bakery cafe with over 70 stores across France, locations in Italy, Luxembourg, Switzerland, and now Bäckelstein is expanding to India with plans for 100 outlets, if I'm not wrong, in major cities like Delhi, Mumbai, Bangalore. Bäckelstein was founded in 2011 in Strasbourg. We'll expand on that. On in a bit, and has an incredible backstory. Thierry, I truly admire you. I think I've said that a lot of times. So for those of you who are listening to this podcast, Thierry originally started as an auditor and even worked at an auditing firm. At the time, I believe entrepreneurship wasn't on your radar. And fast forward today, you've built a massive franchise brand while also teaching business concepts to students. at HEC Paris. So I'm short on words. From our chat so far, I can already tell you that you have a fantastic sense of humor, and that's also— yeah, you do, you do.

I'm blushing.

And that's also reflected in, in the cafes that you own. So I think I would just welcome you to the show now and just discover who you are.

Well, thank you so much for the, for the introduction, Abhi. You know, we Wow. It's just wow.

Wow.

I'm very honored to be with you because you're, you're somebody actually. And it's a real pleasure and real honor to be there with you. I just want to correct something because you said that we have 70 restaurants. I'm afraid to announce you that we have 82. And why am I correcting you? It's because each and every one is such an effort to convince to, to sign a contract that Everyone is important to me. And so we have 82 restaurants right now.

Which is a great, great thing to know. Can we start with your background? What's your story? How did you get from an auditing firm to Bagelstein?

You know, something is leading my life that in our lifetime, we have only one thing we have to do. The only thing we have to do Is to realize our dreams. That's what I keep saying to my kids: realize your dreams. This is the only thing you have to do when you're alive on Earth. Sometimes the main problem is what's my dream, and a lot of people never, never set up their dreams and never define their dreams. When I was in business school, I was excited by auditing, and you know I teach a lot in business school, and people say, "Are you crazy? How can you be excited by auditing?" This is the most boring thing ever. But in my mind, auditing was going in a company and listen, listen, people listen what they were doing. I, I was dreaming of understanding the way companies were structured, were organized, how they were going good and going bad. And every week in another company, in another field of business, this was very exciting with people my age coming from the same same mold as I came from. So I was very excited, and I joined PricewaterhouseCoopers. At the time, there were no Coopers, um, and I traveled all worldwide. I, I lived in Australia, Singapore, California, London, Paris, and I, I was really, really stuck. I was, I was not prepared to be an entrepreneur. I was the perfect soldier for such a company. I was working 7 days a week. I was— it was like up or out. I was— I loved this time. But after 10 years, I say, okay, now it's time for another dream. And it took a little bit of time, but I realized that I wanted to work in a field which was a hobby for me. I need I needed pleasure.

Right.

And at that time, I had 3 hobbies. I played the guitar. I love to eat. And I love to play football. Okay. Guitar, I'm not good enough. I love to play, but I'm not good enough. Let's forget about it. Food, in another life. It will come later on.

Football.

I became the CEO of my dream football club from my hometown in Strasbourg. I became the CEO. So I changed from auditing to football, and it was like, it was really realizing a dream because all the people I was working with were the people I was— they were on my walls a couple of years ago when I was a kid, and now I was working with them. Oh my God, every morning I pinched my skin and said, are you dreaming? It was amazing. But some dreams should better stay dreams. And football world is more like a nightmare than a dream. I was not prepared to many things that happened in the football business. Too much money, not enough brains. And so I stayed 3 years, but it was a great experience, but I was not prepared really well for this. So I decided that my next dream would be entrepreneurship. And I made a partnership with my brother-in-law. And at that time, it was in 2004. We decided to open a sushi restaurant in Strasbourg. It can be very— no risk now. But at that time, there were maybe 5 sushi restaurants in the whole of France. Nobody knew what sushi was.

Wow.

And in this little town, have people eating raw fish. And it was on a kaiten, you know, on a conveyor. So have raw fish coming to you in your place? What is? And it was the first step in the food business that we made. He's still my partner and Bagelstein belongs to him and me even today. But at that time, something very interesting happened. We hated the Japanese desserts with red bean pasta, you know? I hate that. It's good to make the bricks stick on the wall, but not to put in your bed. So what we did is on our conveyor, we used very nice French pastries. So there was salmon sushi, chicken yakitori, and then raspberry and basil macaron, and then praliné on balls. And then fried chicken with Coke.

This is crazy.

Or salted scallops with popcorn. It was crazy.

And how was that received?

People loved it. It was very successful. And then we decided, okay, we're going to make some others. But we were too much relying on the skills of our Japanese chefs and our pastry guys.

Nice.

And in, in the one we had in Strasbourg, we could master and control. If we open another one, we were not trustful enough. So we decided that we, we would create a new concept. And this is how Bagel Sun came on. Because I lived in the US, so did my, my partner. And we found a location in front of a high school and say, we're going to make a special place for students. where they have free items when they can prove that they came in our place rather than going to school. And what could we do in this place? First, we tried like street Asian food, like bobuns or egg rolls, but we said, no, it's not going to be good. And everybody loves bagels. And every French people who goes in New York say, I'm gonna open a bagel place, but no one never did it. So we said, okay, bagels can be a good idea and it can be also an all-day offer because you don't have a boboon at 7:30 in the morning, but you can have a bagel and a muffin or a cookie with a coffee and things like that. So, okay, let's go for bagels. Then what we did is I hired a baker and I say, make me bagels. But he didn't know what it was. So he read in the books and we tried, we tried, we tried. I was not happy with that. So I took my bad bagels and crossed the ocean to New York. And I knocked at the door of some bagel makers. And I said, I will never be a competitor of yours. I'm too far, but something is wrong with my bagels. Can you help me? And you know what they say? They say, fuck. They say, no, no, go to hell. I don't care. Except one guy. One guy in Brooklyn said, come on, bagels are all my life. I cannot stand that somebody in France do bagels the wrong way. So stay with me. And I stayed 2 months with him. And I changed everything that needed to be changed to have the good bagels recipe. So I came back in France with the good bagels. But then came another surprise, is I had the New York bagels recipe. It was exactly the same. But when I make French people taste it, they didn't like it. It was too heavy, too dense, because they were too much used to the lightness of the baguette, then the bagel was not good for them. So we had to step back and to adapt the New York recipe to the French taste. And that's how Bagelstein was born.

Wow. This is like a MasterChef 101 going on here. Seriously. Yeah, there's some nuances that people don't think of. Bagels is one thing, but also then you have to look into the culture you feeding that food to, and that varies from country to country. So as I understand, you shifted to Bagelstein from that sushi store concept because of the control factor as well, to be able to have the control.

Exactly, exactly. Control of— and you know, uh, the, the conveyor was a great thing because people eat a lot on the conveyor, much more than when you have to order from a paper menu.

Mm-hmm.

But you need the conveyor to be full of food. It's really, it's a good lesson that everyone should remember. We had 95 seats in the restaurant. If all plates on the conveyor were touching themselves, meaning all they were A lot of plates, or if they were 20 centimeters between each and every plate, the turnover was double or divided by two for the same number of customers. The more you have, the more they eat. But at the end of the day, what you didn't sell is thrown away. Because when you have a salmon sushi. that stayed for 45 minutes on the conveyor, you cannot put it in a fridge pack.

So I believe, you know, people think about economies of scale, but maybe that's not applicable in all kinds of models. And there's a downside as well. And that was not the case with bagels because I believe the problem was the conveyor belt. When you started with Bagelstein, how much capital did you have? Did you just finance everything yourself or? What was it like?

Crazy. We are crazy people, my partner and I. This is something everybody needs to remember. We did things that we couldn't do now. Everything started with €1,000.

Wow.

€500 from me, €500 from him. And we managed to borrow at the bank 120% of our needs. With no capital. So, but you know, it was actually, it was bad. We, at that time, we were very proud and very, very happy that we succeeded in doing that. But after 1 year, we needed cash and we had, we had to raise funds. And we had to raise funds because we didn't put enough money in the beginning. And we have to give up some shares of our company because we didn't put the money at the time. So we did, we had to do it after all. We had to give up some shares of the company because we didn't put enough money in the beginning.

Well, those are the mistakes that, yeah, you're young, as you're young in entrepreneurship. How old were you back then when, when you started with Wegelstein?

How old was I?

Yeah.

Oh, I had, I had, I made a short resume of my life. I was, I was 43.

Oh God, that's, and, and look, look at it, it made a very fast, um, I think the, this, the way you scaled up, it was quite fast. I wanted to ask, you know, what makes it so lovable for consumers? Because I love the model and we're going to expand on it, but what is so special about Bagelstein that consumers love it?

We had no money. You understand that because we had no capital in the beginning. So we need to find a way to become popular without money. It's very tough. So we decided that our communication would be very borderline and we decided And it's very, very difficult. We decided that we would agree that some people hate us. This is— think about that, because how many brands are okay with hate?

Very few.

And this is the way we did. So we had a communication very, very borderline. And so that made us very, very different. very popular very fast. Sorry for the one who hate us, but the one who love us, they talk about us.

I think that's a marketing gimmick as well, to do something that, you know, you, you have to be a little borderline. Um, so yeah, and what, what was it that made people hate Bagelstein exactly?

Um, For instance, we were official sponsor of the Gay Pride in Paris. Okay, so we had t-shirts. Sorry for your auditors. In reference of the shape of the bagel, the t-shirts will say We don't care about the sex, we only care about the whole.

Okay, I see.

And so people find it wow, and some people say, oh my God.

Yeah, I see those kind of messages, how that might— but again, I think it's also, it sets you apart because it's a bit French.

Yeah, very French.

It's so French.

Definitely, definitely. It's very French. But, you know, we had, you know, Hard Rock Cafe?

Yes, of course. When you come to Bombay, we can go there as well.

Okay. And, you know, in Hard Rock Cafe, you got, for instance, John Lennon's guitar with an autograph of John Lennon. I'm very familiar with guitars and I love guitars. And I can assure you that this guitar, John Lennon never saw it. But they put a guitar of John Lennon and they say, John Lennon. We did the same with Bengelstein. For instance, we take pictures of famous people like Johnny Depp and we say, this is Thierry Weil. And people arrive— Thierry Weil is me— and people arrive and say, oh my God, Thierry Weil really looks like Johnny Depp on this picture. It's—

this is insane.

Yeah. Or for instance, what we did, um, we made the first space cake. You know what space cake is in Amsterdam?

No, I don't.

It is cake with cannabis inside. It's forbidden. And we said, we're gonna do the first space cake with cannabis flower. And so we made a special advertising communication on the social networks with our customers arrested by fake policemen. And actually it was April 1st, so it was a fool— there was no cannabis at all. But people loved it, and people were calling us and saying, I ate 4 muffins and nothing happens, I want my money back, you know. And this is the kind of things—

This is the kind— I, I honestly love that. And I think sometimes in business you need, you need both parties to validate or not validate. Even invalidation leads to, uh, some kind of marketing stunt at the end of the day.

In every bagel sign, you got a board saying your Weight Watchers coach is eating here every day. But we might have trouble with Weight Watchers, but we don't care because people take pictures of that, put that on Instagram, and UGC.

Yeah, that's a great idea for user-generated content. And I love that. And there are very few bakeries that actually take advantage of using something as simple as their walls to get people to engage with the brand in a way you would never think of.

But there is a reverse of that. There is a bad point. The bad point is We are baking our bagels every fucking day and we are delivering our 182— sorry, our 82 stores every day with fresh bagels, fresh cookies, fresh muffins, homemade by real bakers with real ingredients. And when we are telling our customers, hey, this is homemade, never frozen, no conservatives, no chemicals, Make daily basaur bagels. You know what people say? They say, hey, this is your best joke. Wow. No, it's not a joke. It's true. So we are doing so many jokes all day long that when we are talking about our products, people think that it's still a joke.

There's a story for kids. I don't know if it's famous. It was famous in France as well, but it's a story about this shepherd who keeps lying to the people all the time that Oh, you know, this fox— no, this wolf ate one of the kettles, and every time he comes running to the village and lies. And every time people go save him. But the last time when he says that it was true and nobody believes. That was the story we were told about lying.

Exactly.

I do see that. But you made an interesting point. I read it about you that You tried to increase the shelf life of the bagels so that you could also— so increasing the shelf life would help you decrease the frequency of the delivery from 1 to, I believe, 2 days. So I think that's a great— can you expand on that? How that makes an impact?

Yes, this came from the COVID time because at that time our franchisees, you know, I have 82 restaurants, but actually it's a franchisee network. And they, they are my franchises. And these people invest a lot of people and their savings to open a Bagelstein restaurant. So I feel a huge responsibility towards them. And when COVID came out, my main concern was I need them to keep being profitable. And they were delivered daily from our central bakery in Paris. And we said, what if we could deliver every 2 days instead of daily? This would cut the, the transportation invoice in 2, and it's a huge, huge line in the P&L. So, but the thing at that time, um, bagel, um, lifetime was 24 hours.

Okay.

So we decided— I hired a consultant in bakery, a guy that's doing only bakery consultations, and I, I said I want to increase the lifetime of my bagel from 24 hours to 72 hours.

Mm-hmm.

But I don't want to put any chemicals in because that's very easy. You, you can do it, I mean, just like that. You put some chemicals and it can last 5 weeks, really 5 weeks, but it's full of shit. For instance, the bread that you eat in the plane, when you eat, it was baked like 4 weeks ago and now frozen.

I would not eat it again.

Think about that. So now you would think about me when you fly back. So, and, and I said no chemicals inside. And we had a huge work. It took a couple of weeks, um, with the temperature of the water that we put on the flour to make the dough. Like, um, we have some natural enzymes that we were allowed to put in, and especially the The temperature that we storage, the how many days do we store before baking, and we succeeded from 24 to 72 hours. And this allowed us to deliver every 2 days instead of every day.

I think this is a very important lesson for the kind of brands that have perishable items, how increasing the shelf life can be a game changer. One of the things I really like about Bagelstein is, and I've never heard about this concept, to be honest, maybe there exists, but you having a central bakery and you controlling all the other franchise units through the central bakery. How has this model made Bagelstein very scalable for your franchisees?

It's a very good question. Really, thank you for asking, because this is one of the key success factors of the expansion of the brand. Because, um, I want my franchisees to get focused on one thing: sales. The only thing— customer relations and sales. And I'm gonna take care of everything else. So I'm gonna deliver to them baked bagels, baked cookies, cheesecake, muffins, crumble, but also everything they need to fill the bagels. Tomatoes, chicken, lettuce, cream cheese, but everything is ready to use. This is very important. Tomatoes are sliced, lettuce is shredded, cream cheese is whipped, chicken is minced. So there is no kitchen. There is no kitchen and they're delivered every 2 days.

That's perfect.

So they don't need a lot of room. It's very tiny. They don't need storage. The display is enough. They have no freezer, they don't need no vacuum, they don't need no building authorization to make food. So, and they don't need a lot of investment. The CapEx are very, very low. And so you can start like that to have a bagel sign restaurant because everything is ready to use.

I love that. It's, it's a, it's a true case study of, you know, how you can genuinely help the relationship between a franchisor and a franchisee. And eliminating this restaurant element, the kitchen element, I stand corrected, simplifies things a lot, a lot. Even hiring, I believe, because they don't need to hire chefs.

I have no skills. I don't need a chef. I don't, you know, everybody's asking me, isn't it too tough right now to find some skilled people to work in your restaurants? And yeah, I don't want skilled people. I want students that need to eat. This is the only thing I need to work because I don't need— they don't need to do anything. Everything is ready.

You have a couple of variations at Bagelstein, and I know that you as a person, you're— because of your finance background, you know, you try to relate everything to the performance. So what are the metrics you look at when you, let's say, have a new recipe And the way it impacts the profits at different units.

We have a lot of new recipes. We changed 75% of our menu this year. So it's— your question is very relevant. I have an R&D service that is working for new recipes. And you know what? There are no chefs, there are no bakers, there are engineers.

Interesting.

And the thing, I don't need your recipes if, if it's not profitable. So they know that they have to, to deal with a special margin rate. Mm-hmm. And they have to make new recipes that, that respect this margin rate. Otherwise, I don't want to hear about that.

Right.

But then came a new game changers this year is we have hot bagels, which we didn't have for 12 years. But this year we launched a new range of bagels, hot bagels, that came to compete with burgers. It's not burgers, but it comes in competition with burger because it's gonna be pulled beef with, um, chutney of onions and melted cheddar.

Mm-hmm.

So it's, it's very important food, if you're— and but then the price is much higher. And the question was, can we go below the margin rate but respect the margin in euros? Because we have to take into consideration, at the end of the day, it's the amount of euros that is important. So we have to make some balances. with this new range. And it's a new way of thinking, of working, and of setting up the new recipes.

It certainly is. It's, yeah, being more scientific and objective. Not just— I love that. I really wanted to have this podcast with you for this exact reason, because it's one thing to run a brand in the bakery space, but also keeping in mind, how do you mathematically calculate the profits, centralizing the system. There are a lot of things that you do at Bagelstein which are very, very unique. Wanted to ask, how do you balance the baking business and managing the franchise system while you're expanding at this rate?

Well, I have an amazing team and I couldn't do it without them. It's really a team A team challenge. You know, we, we could— we come from nothing and now we are elected for the 4th year best sandwich brand in France. We— the brand is coming in India.

Wow.

And we are talking about Dubai and Morocco, Australia, Singapore. So I couldn't do it without the team and we have very high skills. Um, in our different services, we, we are very close to our franchisees, very close. Every problem they face, I faced it and I solved it. So my job now is to help them, and we have a team of 7 people dedicated to helping franchisees. We are 7 days a week with them. WhatsApp is wonderful for this. We are, we are in touch all day long with them. And so this is one service. We have this communication, which is very important. We talked about it. How do you keep being borderline in 2024? Because the jokes you can do now are not the same, the one you could do 10 years ago.

I understand.

It changed a lot. And we have this R&D and supply chain team, and we— well, everybody is really in a special Begelstein mood. Even in the accounting services or legal services, there is a Begelstein spirit.

That's something I've seen very unique to successful brands is the kind of people they hire, which is ultimately also impacting the success of a brand. Do you also plan to have your own corporate units alongside the franchise units?

We do. We do. Actually, we had a lot. We had 24, but we downsized to 3 because my job is to be a franchisor. This is what I love to do, to help people get better, to improve their commercial and business performances. I had too many problems with my own restaurants. I keep 3 because it's a laboratory, it's a testing restaurant and a training restaurant for my new franchisees. But my job is to be a franchisor, definitely.

I love that. Through my conversations with people, this is a topic that resurfaces time and again, that a brand, once it gets into the franchising space, it becomes a franchise brand, and that has to be at the center of all the operations that are going on. So it's, uh, it's really amazing how you're balancing the bakery business alongside the franchise business.

It's— and you know, we went further, and this is something that even my franchisees do not believe. Let me explain you. Um, I have a training, I have a central bakery, and I sell to my franchisees what they need to sell. So I have actually 2 responsibilities. I am, um, I am a franchisor and I am a supplier. And the supply business is not a profit center for me. I don't want to lose money, but I don't want to earn money because what I need is my franchisees to be profitable.

Right.

So if I have a too high margin in my central bakery, I will decrease their margins and I will put them in danger. So I, I, and it's very important right now when, when the, when the prices decrease from my suppliers, I decrease the prices to my franchises. Because my only thing, my only concern is to have the more profitable franchisees that I can. They need to be profitable. I am a franchisor. This is the main topic. The central bakery is not a profit center. It's a tool. It's a tool to make my franchisees happy and profitable.

When you started, a quick question. First of all, really, I truly appreciate the kind of values you have, because that certainly is lacking in many franchise brands. They forget that they are no more a cupcake business, but in franchising business, that does lead to the downfall of the brand itself because the relationship is what impacts the success. Do you think that you're going to follow the same marketing gimmicks in other countries? How do you think about that?

Oh, this is very, very tricky. You know, when we arrived in Germany, we just translated our French jokes in German, and this was very inappropriate because we made fun of German, and it was a bad idea. So what we did is we worked with a German advertising agency, and All together, we explained the borderline humor sense of Vegostein, and they adapted it to what they knew of Germany. And this is what we're going to do in every country we're going now.

Yeah, that makes sense. Do you have anything to say to franchisors, emerging brands that are in the food service space to think of when it comes to franchising, the ones that aspire to to convert their brand into a franchising business, how many units shall they have themselves first before getting into franchising?

We started, we started with 2. We opened our first franchisee when we had 2. So it's not the numbers, it's, it's not the metrics, it's not the balance sheet that you have for your own. You don't need to have 10 and 10 profitable. You need to be strong in your head and to believe in your vision. And you have to convince people. The products have to be fucking good because this is, this is the rule number one. If it's not good, the jokes won't be funny and the marketing will have no sense. So quality is number one thing. When you have the quality, you can convince the whole world. Believe me.

I'm so grateful to have a chat with you.

Thanks for the smart questions. You know, I know I'm doing a lot of podcasts, but this one was very special and I really thank you for the way you laid this.

Thanks a lot, Thierry. Cheers.

Take care.