While George Schenk ran the Flatbread Company’s wholesale bakeries in Middlebury and Waitsfield, its full-service chain of restaurants were run by licensees. Though Schenk had gotten into the food business by accident, after decades of research as a biologist, he later stated baking flat bread topped with cheese and meat. This invention was made when Schenk was working on a prototype in the inn kitchen. This new bread was a hit with guests that Schenk begun selling frozen pizza to area markets. By 1992, the demand for flatbread had outgrown the production at the inn kitchen. This made Flatbread Company operation to double and thus prompting Schenk to move it to its current position in Waitsfield, Vermont.
Right from the beginning the American Flatbread company had potential to attract interests from potential restaurant partners but Schenk was not willing to take the risk; it was not until 1997, when Schenk met an executive from Boston insurance, Jay Gould who wanted to open a flatbread restaurant. When Schenk asked him why he wanted to do so, Gould gave an answer that interested Schenk “to bring great food into my community” (Bluestein inc.com). They quickly come up with an agreement that gave Gould an express authority to open a restaurant using Schenk's oven design, recipes, and American Flatbread's artwork and signage, but not its name because they were concerned about messing up with the frozen business if the restaurant business was to fail. The restaurant was named Flatbread Co. their agreement placed more focus on, local organic community, than the business details or operational specifications and, this gave Gould a lot of room to operate.
Gould opened chains of restaurants such that, by 2006, the total revenue exceeded 4 million U.S dollars. American Flatbread and Flatbread Co. were quickly becoming two different entities. Schenk wanted to franchise, but Gould was contrary to the idea. This created a deadlock, and they had to part ways. Under separation laws, Flatbread Co. had to pay American Flatbread a sum of money for exclusive development rights. Flatbread had limited ability to protect its recipes and menu items. It was focused on protecting its rights to the use of its distinctive names.
American Flatbread Company’s move to franchise so as to gain more control was a brilliant idea, but having both licensees and franchisees in the same industry was a matter of concern, because both were running the same food industry and selling the same products. Becoming a franchise was not going to solve Schenk's problems of control because in practical terms, franchises are never in control even if the agreement states so. American Flatbread Company was on the right track when focusing on people with shared values and, therefore, needed to follow the same pattern when selecting franchisees.
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