AN INTERVIEW WITH MATT KREUTZ OF FIREBRAND ARTISAN BREADS

Matt Kreutz is the CEO of Firebrand Artisan Breads, an Oakland bakery where service – to their customers and employees – is paramount. Matt started the company in 2008 at the age of 26 and built it into “one of the most recognized bakeries in the Bay Area,” according to Fortune.

In this interview, we discuss with Matt his passion for baking, incredibly structured work schedule, love of Stoic philosophers, activism as an employer, and the process behind making Firebrand a steward-owned business, including the details of the company’s structure, governance, and capitalization.

We hope you enjoy this conversation as much as we did!

You describe your breads as having an “ugly, beautiful quality” - what do you mean by that?

We specialize in doing wood-fired breads and pastries, and we have an old-world aesthetic that we want to show off. It’s ugly artisan, but it is also handmade. And that means that sometimes the cracks and crags show up. There are dark splotches and uneven patterns. And that's also part of working with a wood-fired oven. When you work with a wood-fired oven, there are a lot of variables that you're playing around with. Sometimes your product can be a little darker than normal or a bit uneven, but in a beautiful way.

Can you walk me through your typical day?

I get up around 3:00 AM. Then I work out and get back home around 5:15 AM to shower and drink coffee. My daughter is up around 6:00 AM and then I usually watch her for about an hour or so, and then we have daddy-daughter time and we read books and listen to songs and do all that fun stuff. Then my wife usually joins us around 7:00 AM for breakfast. I'm out the door by 8:30ish to head to Firebrand. And then I'm at Firebrand till about 2:30-3:00ish and then I come home. I usually have a phone call or two that I take from home. Then it's family time until around 7:00 PM until my daughter goes asleep and then I usually work for another 1.5-2 hours at home. And then I’ll be in bed by 8:30-9:00 PM.

I keep my day extremely structured. It's a pretty rigid schedule. I have dedicated time for everything I need to do. Every day, I have a list of priorities I need to get done for Firebrand and for myself. My day is just divided by those priorities. And if something is not part of those priorities, then I don't do it. So that could be anything from working out to reading to anything Firebrand needs me to do - that all has to fit into that schedule.

So this strict schedule is five days a week or seven days a week?

Seven days a week I’m up at about 3:00 AM. You know, there's like one day, sometimes two days I don't work out, but I still get up at 3:00 AM. That means I'll just make my coffee earlier. And then I just do more - projects I need to do for Firebrand, I schedule it during that time. But I always try to keep the same schedule every day.

Can you bring me back to the origin? How did Firebrand begin? Where did the inspiration come from and what made you start?

I've been baking since I was 14 and have never done anything else. My first job was in a bagel bakery, and I just really fell in love with bread baking. From a very early age, I was super lucky, I just fell into it and was like, “Hey, this is what I want to do.”

I went to culinary school for a hot minute in New York, came out to California as part of an externship program and was not interested in going back to New York after that. So I stayed in California, dropped out of culinary school and then bounced around to a lot of different bakeries and wood-fired ovens. I always had a goal of like, “Hey, when I'm 25, I want to start my own business.” I was running other people's bakeries and eventually felt like I could do my own thing and see how it goes. And that's how it started, back in 2008.

You actively recruit individuals with gaps in their work history, and many of your employees are formerly incarcerated or homeless. This is a pretty activist position to take as an employer. Can you talk about your thinking behind this?

It has evolved over time little by little as we’ve grown, because part of it is personal. For about a year and a half of Firebrand’s history, I was homeless. I was sleeping in the bakery. We gave up our place because we couldn't afford to run Firebrand and rent a place in Oakland, so we were sleeping upstairs at Firebrand in a little loft area for a year and a half. Also, my mom had issues with incarceration. When we were starting to hire people, we didn't know what we were doing. We were just trying to figure it out. Things like job applications were so foreign to me anyways, so we just didn't care. We were like, what’s your personality? Are you a good person? Do you want to work? Do you have a lot of drive to be here? That's really what's most important to us. We don’t care about where you’ve worked and I've always taken that position.

So this perspective has evolved into us being like, “Hey, how can we make an impact” What we didn't know was that our process is similar to something called “open hiring,” which is a hiring philosophy that removes all barriers to employment. So, we don’t do interviews, take resumes, do background checks, or anything like that. We’re focused on hiring people with high barriers, such as formerly incarcerated or homeless. We want to just to give people a fresh start.

As we have grown, my role has really evolved. I baked every day for a decade and didn't have a day off for a decade and then I worked myself out of a job and I realized now I have to be a CEO. I wanted Firebrand to be around for a really long time. I have no interest in selling the company, and I wanted us to be focusing aggressively on impact over the past three or four years. Being more active and intentional about it.

Do you have an explicit mission or purpose as a company?

Our mission is to create a more just and equitable workplace, shared value, and thriving communities through the craft of baking. This concept of “shared value” really resonated with me, and it aligns with steward ownership principles. How do we create a company where it’s not a top-down system, where everyone adds value and the company returns that back to the employees. How can we make sure that all our stakeholders in the company actually win?

If Firebrand is successful, our stakeholders (employees) are successful and everyone shares. How do we build that up? And then what does that mean? That could mean great wages, fully paid healthcare, and a good workplace. Maybe in a couple of years, we're helping out with housing assistance and we're leaning into other areas like childcare. What does it mean for us to provide shared value to our staff? How do we build a culture and team where everyone is valued and thriving? These are things we focus on all the time, how can we get better and make Firebrand a better place. I want Firebrand to be like an old-school factory job, where you can build a life from it, you can buy a house, have retirement savings, build real wealth and skills that transfer out to the community.

You mentioned steward ownership. You recently made the big decision to transition partially to a steward ownership structure. How did you discover steward ownership and start thinking about making the transition?

We started fundraising a couple of years ago and realized there were two different paths for us. We could partner with the more impact-aligned investors or go the small family office, private equity path.

We are launching a new product line, which will be our first consumer packaged good product, and thought the private equity people would be interested in that. Relatively quickly, it was apparent that the private equity thing was just not going to work, that we were not mission aligned with them. The process, however, helped us better understand our beliefs and issues. I knew I didn’t want to sell, and I wanted to be active in the company.

No one was really aligned with what I was thinking. So we started talking to a lot of these social impact groups and we had a talk with RSF Social Finance and they were like, “Hey, have you heard what Organically Grown Company is doing? Do you know about their model?” I knew about ESOP's and co-ops and all that stuff, and so they suggested I check out what OGC was doing. And then we got connected to the folks at Purpose and they were like, yeah, this is what this is, this is what we do and let us know what you think. And I think they sent me their e-book. And I read it in a day.

I got back to them two days later and said this is how the structure needs to be. This is what I want. This is how it should look. They said, “Ok - we have a whole questionnaire…” And I was like, no, no, no, no, no, this is how it needs to look, I was hooked on the model and everything fell into place quickly.

Because I had so many conversations with these private equity people and with the mission-aligned groups, it was pretty easy. It forced me to do a lot of thinking about what’s truly important. It was easy to create the structure and the layout that aligned with my goals. It was also easy because I owned 100% of the company at the time, so I didn't have anybody else to tell me no. It was just a lot easier.

Can you talk specifics? What does the structure look like for you? What does steward ownership look like for Firebrand?

I donated 51% of my shares into a trust. The trust now owns a majority of Firebrand and is governed by a Trust Stewardship Committee  (TSC). The TSC is made up of five people. I am one of the people on that committee, but we also have a manager seat, employee seat, and two community seats. Those two community seats consist of one community seat and an independent viewpoint seat, which is staffed from the outside. They have no connection to Firebrand whatsoever and no financial ties.

We didn't want any financial ties to the company on this committee. I wanted them free from the constraints of money. I wanted them to be able to generate ideas, push the boundaries of Firebrand’s mission and not have someone in the room ask: how are you going to pay for that?  The idea was that we would basically set up one board, which is the trust stewardship committee. That board is in charge of governing the Purposes of the company. We have 11 Purposes that are embedded in our charter and that we're legally obligated to uphold. And this committee has the job of operationalizing those 11 Purposes. That’s their sole focus. They don't care about our financials. 

Everyone understands that it’s a reality that we have to make money or we’re not having a 401K program,, but we didn't want that pressure in the room. We didn't want pushback from an investor or anything like that. We wanted it to be a really cohesive space. We also have a normal, operational board, that the investors can be on. I'm on it. We have an employee seat on our board as well but the two boards have independent responsibilities. There's an inherent tension between the two with one pushing a social mission and the other being responsible for funding that social mission. We wanted this inherent tension between the two and we essentially wanted employees to be on both boards so there’s always an employee voice.

[Editor’s Note: Our friends at Purpose wrote a great case study about the specifics of Firebrands structure and governance, which we recommend]

I liked that idea of building in tension that's productive – a positive tension.

We have good investors who are super mission aligned. They want to hear about what's going on in the trust stewardship committee but they have no say over what happens with that committee.

Regarding the trust stewardship committee, how active of a role are they playing now? Is it more oversight or are they taking a more active role, meeting regularly, etc.?

The committee has been meeting every couple of months. So they've been really active. We've asked them to be active. We want them to pitch in and offer their viewpoints. We want a lot of voices in the room. I didn't want Firebrand to be solely dependent upon one person or a small group of people's strategic vision. We wanted to bring in different perspectives.

How can we push our social mission? How can we be doing better? How can we be doing more? How can we refresh best practices? There's only so much time in the day and I didn't want it to say, “well it's all dependent on me or a couple of people here.”

We wanted people to push the company. During our last meeting we literally broke down all 11 of those Purposes and created a list of questions we’d like to tackle:

• How do we do this?

• How do we make sure that we have a profit-sharing program?

• How do we operationalize that?

• What’s our idea of a good job?

• How do we find that out?

• And how do we go about defining that?

• How do we go about increasing benefits and what does that mean?

There’s a lot of questions. We're bringing them up and trying to answer them.

[See Firebrand’s 11 Purposes here]

In terms of authority, what is the trust stewardship committee able to do to affect their goals? Are they hiring and firing the board or the CEO? What are their abilities and constraints?

They represent the employees as the largest shareholder of the company. As the largest shareholder of the company, they can hire and fire anyone on the board. They can totally wipe the board clean and hire new people. I'm getting their approval for the last board seat, so they oversee the board essentially, from a governance perspective.

Got it. So the Perpetual Purpose Trust governed by this committee owns 51%. And then what's the story with the other 49%? Is that still just you?

So that's a mix. I’m the largest shareholder of the 49%, but Candide Group, Fund Good Jobs, 45 North, and Cienega Capital are in the mix as well. We also carved out an option pool for key employees or key hires if we wanted to reward them with equity.

So these equity investors you brought in alongside the trust, what sort of shares do they own? Are they non-voting shares?

Some can vote. 45 North and Cienega can’t, but Candide and Fun Good jobs can because they're the larger of the four shareholders. They have positions on the board and can vote on things.

They can vote as board members, but they can also vote their shares as shareholders?

They can under certain conditions. Candide [the lead investor] was really flexible about the fundraising structure. We were able to use a restaurant flip model for fundraising, which is not traditional in private equity at all.

What that means is if there's a hundred dollars of dividends to be paid out at the beginning, Investors will get $90 and the employees get $10. When they've reached 2X their investment that flips, so the employees get 90% and investors get 10%, and that 10% continues to be distributed pro rata in proportion to their ownership. It kind of expands on this shared value concept. If there’s any dividends to split, then the employees get a percentage of that, but they really get a huge percentage of that once investors get 2X on their investment.

Once investors get that 2x, then it's 90/10 for the employees forever. What did you call that? The restaurant flip?

Yeah, so it's a model typically used in restaurants. People who invest in restaurants use it because it’s a quick way to get your cash out and move on. It’s not used in a private equity setting or anything like that. This is not something they would be comfortable with at all.

It’s a cool design. I like that. So besides stewarding your purpose, were there other reasons you were attracted to steward ownership? Why go this route rather than maintain ownership yourself?

Firebrand's not some cash cow, you know what I mean? I do it because I love it. I don't do it because I make a lot of money, because I don't. I don't look at Firebrand that way.

So why does Firebrand matter? It matters to me that Firebrand is around for a long time. And it matters to me that we maintain our independence, that we build relationships and community around like-minded individuals. That we build our own ecosystem. I didn't want to be on a hamster wheel of fundraising where everyone's just got their hands in the pot and at the end of the day there's nothing left. I want Firebrand to really mean something to the people who work here and our community.

We wanted to be able to lock up 51% of the company in perpetuity. If Flower Foods or Bimbo comes along and wants to buy Firebrand, it legally can’t happen. We wanted to safeguard the mission as well. I wanted it to be carved out, so if I get hit by a bus and someone takes Firebrand over, it doesn't matter. You can't change what we do at Firebrand. I also wanted the company to be set up for the long haul too and not subject to the whims of whoever's investing or whoever is in control. The company’s mission is legally defined and cannot be changed. I wanted to protect that. It was important to me that we're around for a long time and that we're independent.

That's really well articulated and a beautiful vision. Speaking of the long term, when you imagine Firebrand in 2031, a decade from now, what does the company look like to you?

Hopefully we've got about 200-250 employees. We’ve got our bakery in Alameda that’s pushing capacity. We have a spot here on Broadway. We want to make sure that everyone is making well above living wages. We’re paying full dental, medical vision for our employees and dependents. We want to make sure that our social programming is extending into the community. We’re opening a Worker Resource Center in Alameda and we want to be a community hub for people. We're doing paid volunteer programs, different drives and initiatives. Firebrand is involved and a fixture of the community. I want Firebrand to be very settled in a place, like our new packaging for the sliced bread line says “Rooted in the East Bay.” When you think of Firebrand, you think East Bay, like when I think of Zingerman's, I think Ann Arbor. I want that for Firebrand. We really want to be anchored here in the East Bay.

Overall, we want our team to be thriving and that’s making our community thrive, that we’re a part of people’s success and they are passing that along.

That's really cool - just the overall simplicity of your vision. This idea that bread can fund all of these other amazing things that you're doing and hoping to do.

I mean, you have to make a choice and this is something you need to communicate to investors. We’re not going to have a big profit margin. We're not. We never have, but definitely not now. We want to be able to fund these things. As we speak, we're basically making sure we're moving everybody to above the living wage standard so no one at Firebrand will make less than $16.50/hour, which in Alameda County is a living wage. And then we're moving to offering full dental and medical and vision coverage. But that's a cost. So we're raising our prices and it's just going to be a thing where we have to communicate to our customers that if you want to fund a good job and you want to fund people getting paid, being safe and healthy, then this is what it costs.

We're not millionaires here. You know what I mean? There's no one making a ton of cash. It's all going back into the business. So it's a balance. You're going to have an extremely low profit margin so the company has to be really efficient to be able to pay for all of these initiatives and we’re going to have to get really creative about how we operate in a smarter way going forward.

When you were fundraising and talking about all these things: I'm a low margin business, I never want to sell, I have this mission. Was it hard?

(Laughs) Yeah. That's why it took two years. The funnel gets really small when you say you don't want to sell the majority of the company. Being in a bread business is not the most innovative business. I didn’t start an app that’s going to revolutionize the world. It's bread. It's been around for a minute. It definitely took a long time to get people on board with this.

I think having the steward ownership structure was really interesting because it attracted the right people. We had talked to Candide for about 6 months to a year and have been tight with Fund Good Jobs for eight years, and then when the steward ownership thing crystallized, they were like, “Oh, we're in with that.” That helped catalyze the closing. But when you talk to the private equity people about it, they're like, “I don't want anything to do with this. This sounds like a nightmare.”

We did a mix of debt and equity and ironically, the debt-holders were the easiest to get it. The SBA said, “Oh yes, it's a trust. That’s fine.” After one meeting of explaining it, they were like, “yeah, this is not a big deal.” But it was hard for private equity to understand, which makes sense. I’m not bashing them at all. They have a separate goal and a separate objective. I think that we just weren't in line with those objectives.

Once you identified a culture fit with some of the investors who ended up investing, was negotiating the terms, this restaurant flip model of the 90/10, 10/90, a fast process? Did that take a while?

It took a while. I love Aner [Ben-Ami] at Candide. He is one of my favorite humans. He's great. The great thing about Aner is he's super flexible and the difficult thing about Aner is he's super flexible. (Laughs). By that I mean, it was very collaborative and he really brought us into conversations that there was no way we were going to have with 99% of investors. When you meet with most investors there’s a predetermined term sheet with not a lot of flexibility because they have people to answer to that expect a certain return. Aner was amazing at giving us options and coming up with something that really worked for everyone.

We had presented four different models to him: a profit-sharing model, a revenue model, a standard derivative model, and a restaurant flip model. We had modeled all four of these scenarios out and he was great about pivoting between them. But it took us a while to understand which one would really work. But it was trying to thread a very fine needle of getting their money back, but also having this social mission. So how do we marry those two in a way that works for everybody? Aner was great about being able to sell that to his people. But it did take a while. And not because that's a bad thing, it was just a lot of open, honest conversations: what do you guys need and what do we need and how do we accomplish this? That just took a while.

It did take a minute to get everyone bought into it. Getting Fund Good Jobs bought in, getting 45 North, Cienega Capital, and all the debt people bought in. Not because it was difficult, but because it takes time. You have to build those relationships and leverage those relationships. This fundraise was a relational fundraise. We knew everybody in the room and leveraged those relationships to make it work.

That's great. Thanks for sharing that story. Have you talked to other business owners who have been interested and have been like, “Hey Matt, how did you do this? Is this something I could do?” Or does that come up much?

I talked to a couple of people who were already thinking about this or had started, but they didn't know how to move forward.

And do you tell them, “yeah, you should do it. I think it could be for anybody.” Or do you think it's specific to your business or certain businesses?

I think it's specific to your goals. I try not to tell anyone what to do. Each business owner has to really do a deep dive about what their values, goals and mission is. There's nothing wrong with a co-op, ESOP, or other options. I think it depends on what your goals are and what the company‘s goals are. It just depends. For me and for a lot of companies, I think it's a great solution. It's an awesome solution because I don't think my employees give a shit about owning like 0.2% of Firebrand. I think they'd rather have a better paycheck than the 10 cents they're going to get from a dividend. But that depends on your staff. If I was at Clif Bar, I'd probably want that 0.2%, but this is a different company…it just depends on what your staff needs are.

You need to ask questions of your company and yourself: what do you want out of it?

Firebrand’s not my cash cow that I use to live a lavish lifestyle. . I’m not going to sell Firebrand so I can get a ton of cash and go to Tahiti. I want to work from the moment when I wake up, I want to work for my check. I want to earn my money. I'm fine continuing to run Firebrand and risk what I'm risking. I'm fine doing that, but I want that. And some people don't want that. And that’s okay, but you have to be honest with yourself.

You're going to be the 75-year-old who is still getting up at 3:00 AM and coming to work.

I'm fine with that. I’ve always been a worker bee and I derive a lot of value from hard work. I can honestly say I 100% love what I do, I love the people at Firebrand and I love coming to work every day. I have an amazing wife, her mom and dad were serial entrepreneurs. It doesn't really phase her: early morning phone calls, crazy schedules, etc. It doesn't matter. As long as I'm consistent. If I say I'm going to be here, then I’m going to be here. Then we're good. She’s awesome, he makes it possible and is just a dream wife/mother to our daughter.

This has been super informative and I really appreciate you going into details. Let’s end this with some fun, rapid-fire questions.

Do you or the business have a theme or a mantra for 2021?

I'll try to keep this short. I am not one of those people who's going to shit on 2020. Thank God it's over, but we learned a lot and were forced to do a lot. We got back to what made Firebrand awesome in 2020. We got leaner, which is where we should be. We were a little too bloated and too slow compared to the previous two years. So I think the theme for us is to carry that forward.

How can we carry that attitude, that teamwork, the comradery, the spirit that's been raging through Firebrand since March 2020. How can we keep that going? So the pandemic has been shitty, but it's also been great. We were the “bad news bears” of bakeries. That's something we talked about forever. We tried to shed that a couple years ago and then a year and a half ago we just leaned into it and embraced it. I think we're trying to operationalize and flex into that a little bit this year.

What are the books that have influenced your life or work?

I reconnected this year with a lot of Stoic philosophy like Seneca and Marcus Aurelius. Letters from a Stoic and Meditations are really important to me. I read a lot. All those Zingerman’s books, from a business perspective, are just gold mines. We have cases of them. We pass them out all the time. I read W. E. B. Du Bois’ Souls of Black Folk when I was in High School and that was a really big influence.It meshed punk rock-ness and independence: we build our own community, we do it for ourselves, we take care of our own and we build up a self-sustaining system and economy based on our own values. It really meshed those two things. It was really powerful for me to read in high school.

I also have to give a shout out to the concepts of Peter Kropotkin, specifically mutual aid that he outlines in his book The Conquest of Bread.  I have always been massively in love with Anarchist philosophy and writers.

But yeah, for me this year was really all about going back and connecting to those Stoic philosophers that I was in love with for a long time.

Do you have a favorite bread from the bakery?

German Rye. I love that bread because it was the first bread we developed 13 years ago and it's really old school. It's super nichey. If we're sampling bread, it's always the bread that people are like, “Oh, this is awesome. I'll take the sourdough.” It doesn't always have a place, it's not for everybody. It's very specific. But it's awesome. It's perfect with eggs. It's great with peanut butter and jelly. It's super dope with soups or cheeses. It is always my favorite.

We're also working on a teff bread that is pretty delicious. That's going to be really, really good. It’s going to be our Oakland baguette. I'm thinking of calling it just Teff, which is an Ethiopian grass. It reflects the different communities of where I live in Oakland. So we're developing that teff bread now and that's going to be pretty dope too.

Cool. Do you have a favorite pastry from the bakery?

We do this Blackberry Danish, which is pretty dope. It's really, really good. We're also trying to get Canelés at Firebrand, which are these super French, custard-based pastries that are super amazing. I freaking love Canelés. But that Blackberry Danish is pretty dope.

Is there a bread cookbook you would recommend to aspiring home bakers?

Anything by Peter Reinhart is a good start. He's got a really relatable style. Really great pictures. Everything is well laid out. It's not jargon-heavy. It's a really, really good book. He's also got the science, if you want the “how” and the “why.” If you want the “why” behind the “how,” he gives you that. If you're like, “I just want to bang this thing out,” he can also help with that as well. But yeah, for home bakers, that's what I would pick.

All right. Last question. How can people support Firebrand, buy your products, and find you?

They can come to our bakery here in Oakland at 2343 Broadway. We're on Instagram @Firebrand Bread. We are rolling out a new product line of six SKUs of sliced packaged bread,. It is available now on the website and is beginning to show up at Whole Foods locations all across Northern California on May 31st. It would be super dope if it was really, really successful!

And when you say stores, is it just going to be available in the Bay Area and Northern California or beyond?

We're going to start here in Northern California. We're rolling out with some retailers that we already work with and are going into Whole Foods at the end of May. We've already been working with them for a long time. Then the goal is to make this a national product line in the next five years.

Awesome. Matt, thanks so much for your time. Really appreciate it.

Yeah, no problem. Thank you.

[Editor’s Note: Portions of this transcript were edited or condensed for clarity.]