Business

Turning cookies into cash* Cheryl Krueger recently

sold her made-from-

scratch cookie company to

1-800-Flowers.com for

$40 million. But don't

expect her to bow out

any time soon.

B Y S U S A N K .

W I T T S T O C K

A fter the $40 million sale of her compa-ny to 1-800-Flowers.com on March •28, Cheryl Krueger wanted to thank

her employees for their support. Instead ofhanding out the kind of corporate attaboyone might expect from a gourmet foodand gifts company-like, say, a collectibletin filled with cookies-Krueger offeredsomething sweeter: cash.

"When this merger and acquisition tookplace," says the company's CEO, presi-dent and founder, "I gave all of our associ-ates who had been with us five years orlonger a bonus." Everyone from dockworkers to bakers was eligible for the extrabump: an additional week's worth of payfor every year of employment.

That translated into more than $1 mil-lion doled out to nearly 100 people.

"Without their help, I couldn't havebuilt this business," says Krueger. "So notsharing the proceeds of the sale with themis not the kind of person I am and not thekind of company I want to be a part ofAnd as long as I'm the president of thecompany, we get to set a higher standard."

Above: Cheryl Krueger has grownCheryl&Co. to $34 million in sales sinceopening her first store at the FrenchMarket in the Continent.

As a part of the merger, Krueger willcontinue as president for at least threeyears, and she says she intends to stay longafter that. "Not much will change for me,"she says. "The big change will be the abili-ty to grow the company more quickly. I'monly 53 years old. I have a lot of energyand a lot of ideas for the company, and I'mreally excited about seeing how big the en-terprise can become."

Krueger founded Cheryl's Cookies in1981 and steadily built the business into amultimillion-dollar corporation. Last yearalone, the retail, catalog, corporate and In-ternet divisions netted $34 million in salesfor the Westerville business, which is nowcalled Cheryl&Co.

While the enterprise has a respectablecustomer base of almost 500,000, that'stiny compared with the 15 million cus-tomers in the 1-800-Flowers database.

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Cheryl&Co. products, while still availablethrough the business's website and cata-log, now also will be sold through all of 1-800-Flowers' many marketing methods,including Internet, retail and phone sales,and through partnerships with other 1-800-Flowers holdings, such as the PopcornFactory and GreatFood.com.

"She is well respected and has a goodbusiness mind. She listens intensely andasks a lot of probing questions," says Stew-art Owens, CEO of Bob Evans. (Kruegersits on the Bob Evans Farms board of di-rectors, its first woman member.) "One ofthe really exciting things about the dealwith 1-800-Flowers.com is she can reallyincrease her access to potential customers.It should hold some explosive growth forher."

As for the deal's impact on her personallife, Krueger talks as if she doesn't sitaround counting her money. But she hasindulged a bit: Krueger bought this year'sDecorators' Show House in New Albanyfor, according to the Franklin County au-ditor's office, $2.2 million. "I'd been look-ing at it for six years," she says.

K rueger's story reads like a classicAmerican fairy tale: Raised on a farmin Bellevue by hard-working parents,

she beat the odds by paying for college tu-ition as a waitress and clothing store clerk.She entered the professional world as amerchandise buyer, received rapid promo-tions and earned gobs of cash while still inher 2 Os.

But she wanted something more. So, inher spare time, she baked cookies, usingrecipes she learned as a child from herbeloved grandmother. She started to sellthe cookies, and when she couldn't get abank loan to open a store, she opened oneanyway, financing the venture with in-come from her day job. Eventually, she didwell enough that she quit the corporategrind, and her company grew and grewand grew, and she lived-so to speak-hap-pily ever after.

Krueger is happy to be in the ever-afterpart of the story, but she isn't ready to for-get how she got there. "People today say,'Gee whiz, aren't you lucky that this trans-action happened?' " she says and tosses herhead at the word lucky. "And I'm going,'They weren't there at the time when I hada lot of risks, a lot of debt, a lot of sleeplessnights, worrying about how bills would bepaid.' There were times we'd work withour vendors and say, 'Look, I can't pay youright now. I'll be able to pay you whenChristmas comes.'"

Her brother, Jim Krueger, knows betterthan to credit luck. Jim, who is president ofmanufacturing and fulfillment at Cheryl&Co., has been with the business since itwas four months old. He can attest to how

rough the early years were. "We wereworking seven days a week," he says. Hedid the baking and delivery work;Krueger's partner and college roommate,Carol Walker, ran the stores, and Cheryl,who worked as a vice president of sales forChaus Sportswear in New York, flew toColumbus on weekends to pitch in.

She chose Burdines DepartmentStore in Miami and quickly

progressed up the corporateladder. In 1976, she was

recruited by The Limited (nowLimited Brands), and moved

back to Ohio, where she found amentor in CEO Les Wexner.

If there is a magic bag of beans in thistale, it takes the form of cookies. Krueger'soriginal recipes were inspired by her grand-mother, Elsie Krueger. When Cheryl wasstill a child, her father, Bill, gave up farm-ing in favor of a more profitable career as atruck driver, and her mother, Audrey Jean,went to work at an insurance companyand later as a clerk at a meat-packing com-pany. Elsie moved into the family's oldfarmhouse and helped care for Cheryl,her younger sister Judy and Jim, theyoungest.

Krueger has many fond memories ofElsie. "She would always have cookies andmilk waiting for us at the kitchen table.And we'd dump our books down and talkto her about how the day had went. Andthen my sister would go out and do choresand I'd help my grandmother start peelingpotatoes, and getting things ready for sup-per."

Krueger loved the farm, but knew shewasn't cut out for that way of life. "I justalways knew I wanted to go to college,"she says. It wasn't an aspiration her par-ents shared for her. "One of them had ahigh school education and the other onedidn't, so they couldn't understand the val-ue of an education," she says. "I remembertaking college preparatory courses and mydad saying, 'Why would you do that?'"

Undaunted, Krueger took out loansand worked her way through BowlingGreen, commuting 20 miles her first twoyears to the Firelands branch and transfer-ring to main campus for her last two. Shemajored in home economics and business,

roomed with Walker and by graduationhad a pick of job offers in fashion mer-chandising.

She chose Burdines Department Storein Miami and quickly progressed up thecorporate ladder. In 1976, she was recruit-ed by The Limited (now Limited Brands),and moved back 10 Ohio, where she founda mentor in CEO Les Wcxner. She creditshim, in part, for her own company's in-volvement in philanthropic efforts. "A bigpart ol it is seeing what a benevolentleader Les Wexner is in this communityand how he's challenged people to give,"she says. "That had a big impact on me."

Krueger worked at The Limited untilOctober of 1981, when she moved to NewYork for the Chaus Sportswear job. Amonth earlier, she and Walker had openedthe first Cheryl's Cookies store in theFrench Market at the Continent. Leavingtown was rough, but the new position of-fered a high salary-part of which shecould pump back into her business.

As a woman with no collateral, bankswouldn't loan her money, so she wasforced to use her own savings, salary andLimited stock to keep thinfjs afloat- "I'mnot actually employee number-one be-cause 1 was never actually on the payroll|br the firs! five years of the company,"iruegersays.

The business began to grow. A secondstore opened on Lane Avenue in UpperArlington in January 1982, followed by In-dianapolis in 1983, Kingsdale ShoppingCenter in 1984 and two others, for convo-luted reasons, in St. Louis. Halfwaythrough 1984, Krueger returned to TheLimited and its demanding schedule. Inspite of the strain, she kept pushing for-ward with the cookie business. "The prob-lem with The Limited was I was travelingso much and eventually I wanted to have apersonal life." she says. "So the whole mo-tivation was that eventually I would beable to not travel as much and have a cou-ple of cookie stores."

In the mid 1980s, Krueger quit TheLimited to work full time with the cookieenterprise. In response to direct competi-tion from the Mrs. Field's chain of cookiestores, Krueger modified her concept in1986, increasing her product line to in-clude gifts and gourmet items, such aschocolate and coffees. Krueger's market-ing abilities have helped to propel thecompany, Jim Krueger says. "Cheryl isprobably one of the most talented people Ihave ever met in terms of merchandisingand creativity and designing gifts. She isjust unbelievable at it," he says.

The company began attracting corpo-rate customers interested in gift services.

The catalog debutcd in 1988 and createdheavy sales during the holiday season.Krueger pursued food service accounts soshe could keep her employees busy year-round, leading to contracts with restau-rants such as Max & Erma's and BobEvans.

The original headquarters was a 1.200-square-foot building in Grandview, whichwas vacated after a couple of years for a10,000-square-foot facility on JohnstownRoad before Krueger headed in 1994 tothe current 17-acrc campus in Westerville-with room to expand, which Kruegerplans to do soon.

Another major boost came in the early1990s when Cheryl&Co. began sellingto airlines, landing accounts with U.S.Air and Delta. More growth came fromthe Internet division in the late 1990s,when the daughter of Krueger's assistant, aHarvard student, built a site for the com-pany. And then 1-800-Flowers.com camecalling.

There's been a cost for all the profes-sional success. Krueger has been throughthree marriages-the latest was with TimHorn, who was vice president of humanresources at the company. They divorcedabout two years ago. "The cost of workinglong hours and working hard has had itstoll on rny personal life," she says.

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I n December 1984, Carol Walker was di-agnosed with lymphoma and cancer ofthe bone marrow. "She was reluctant

about going to a hospice environment, sofor that last 16-month period, she livedwith me while she went through incredi-ble doses of chemotherapy," Krueger says."Eventually it overtook her body and shedied in my home."

The death of Walker at age 33 deeplyaffected Krueger. "I saw the look on herface-she looked so happy and at peace,that I know she's in a better place," shesays. "I have very strong religious convic-tions and that you are here as a service.Seeing that at that stage of my life mademe realize that it's not about what youamass here, it's about what you give here."

Honoring a request by Walker, Kruegerbegan a scholarship fund for Cheryl's em-ployees. It was the first of many charitableefforts the company has since made, bothfor its staff and others. Krueger waives thefee for all speeches, asking that funds bedonated to the James cancer center, inrecognition of Walker and Cheryl's father,Bill, who's a five-year cancer survivor.Cheryl's gives free cookies at the stores toany student, including adults taking con-tinuing education courses, who earns an"A" on a report card. The company alsowaives shipping fees for cookies mailed toAmerican soldiers in Iraq or Afghanistan,donates leftover cookies daily to the Mid-Ohio FoodBank and Meals on Wheels(among others), supports mentorship andentrepreneurship programs at several highschools and provides emergency funds toemployees through an Elsie Krueger Fund,established after Elsie died at age 99.

Krueger also sits on the board of theJames, and she is president of the board atColumbus Academy, where her 16-year-old son is a student. Headmaster JohnMackenzie has been impressed by her in-volvement. "She has no sense of superiori-ty. She's a mom who is very dedicated toher son," he says. "She's been great to usbecause she is so committed to education."

Along the way, Krueger has racked upawards for her leadership and success as afemale business leader, including being se-lected as "Entrepreneur of the Year" by Work-ing Woman magazine in 1999 and inductedinto the Ohio Women's Hall ofFame.

"I think it's permissible to guide one'slife by your moral values, and I think mak-ing good fundamental decisions in thebusiness, based on values, is why we'vebeen successful," Krueger says. "I want tobe sure I prepare this business in such away that it survives long after I'm gone. Inmy wildest dreams I never thought itwould turn out this way." •

Susan K. Wittstockis a freelance writer.

134 Columbus Monthly • JUNE 2 0 O 5