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Wetzel Pretzel founders are rolling in dough

Rick Wetzel and Bill Phelps, the founders of Wetzel's Pretzels, oversee a chain with 263 franchises worldwide, 3,000 employees and $107 million in annual sales.

November 18, 2012|By Shan Li, Los Angeles Times
  • Bill Phelps and Rick Wetzel founded Wetzel's Pretzels in 1994 after coming up with the idea during a business trip to Seattle when they worked in marketing for Nestle USA.
Bill Phelps and Rick Wetzel founded Wetzel's Pretzels in 1994 after… (Bob Chamberlin, Los Angeles…)

The gig: Rick Wetzel and Bill Phelps are the chieftains of pretzel empire Wetzel's Pretzels. As co-founders of the Pasadena chain, the pair oversee a company with 263 franchises worldwide, 3,000 employees and $107 million in annual sales. There's also 12 company-owned stores that employ 150 people.

Origin story: In 1994, the two were working in marketing at Nestle USA. On a business trip to Seattle, the colleagues, who weren't friends at the time, started kicking around the idea of pretzels as a new snack-food business. An eavesdropping stranger told them soft fresh-baked bread pretzels were really tasty. The pair got excited and started mapping out a business plan that night at a bar.

"We landed a day later at Burbank airport, Southwest Airlines, and I'll never forget — as Bill and I were getting off the plane, he looked at me and said, 'We'll have a store open by November,'" Wetzel said. "And we did."

That name: They wrestled with finding a name that could be trademarked. Everything Phelps wanted had already been taken. Wetzel, who had been teased in the schoolyard with "Hey Wetzel, you pretzel," kept his mouth shut. But it was inevitable. A friend who was a marketing consultant finally pointed out the obvious — that not using Wetzel and Pretzel would be a complete waste.

Like teenagers: Phelps, 57, is now the company's chief executive, and Wetzel, 54, is president. But after their first store opened in South Bay Galleria in Redondo Beach, both men would begin their days at Nestle and then hustle down to their business, which they opened with $200,000 in savings. Wetzel sold his Harley-Davidson motorcycle and put in money he had socked away for the down payment on a house.

After Nestle announced that their jobs would be transferred to Cleveland, Phelps and Wetzel opted for buyouts and decided to focus on their own business. "Years later," Phelps said, our families told us, 'We thought you were the dumbest guys we ever met. You have a job at Nestle and you leave that to run a pretzel store. You got to be idiots!'"

Wetzel's relatives were also horrified: "You're down at the mall wearing a T-shirt and a ball cap working behind the counter with a bunch of 16-year-olds?"

Competition: Pretzels caught on as a trendy mall snack, and competition was fierce among new rivals and more established firms such as Auntie Anne's. Wetzel's originally had a third partner, a chef who created a recipe for a simple and tasty pretzel. Some of the company's current bestsellers — including pepperoni and jalapeño pretzels — came later, after they were dreamed up by franchise owners.

Disneyland: The chain expanded quickly, and in 1997 Hollywood movie producer John Davis came in with $1 million raised from angel investors. But the pair started burning through the cash and were forced to cut costs. Only after opening a company-owned flagship store at Disneyland in 2001 did the pair realize they had made it. "It was one of the top retailers in all of Downtown Disney per square foot," Phelps said.

A company marriage: Both men are long married and have families. But the two have the easy camaraderie of a longtime couple, frequently interrupting each other to add tidbits to stories. Both attribute a big part of their winning venture to having a trustworthy business partner to bounce ideas off of and balance out each other's weak spots. Wetzel is more interested in development and marketing, while Phelps has a passion for finance and the operations side.

They joke that the partnership was like getting married on a first date. "We like to say, this is my other spouse," Wetzel said. "I probably spend more waking hours with Bill than I actually spend with my wife."

Personal: Phelps and his wife, Megan, live in San Marino. They have two adult children, and he is an avid golfer. Wetzel and his wife, Elise, live in Pasadena. They travel for pleasure and have two school-age children.

Today: Los Angeles private equity firm Levine Leichtman Capital Partners Inc. bought a majority stake in the company in 2007 for an undisclosed amount. Phelps still owns a 20% share, while Wetzel holds a smaller stake. Wetzel, whom Phelps calls a "serial entrepreneur," just launched a fast-casual restaurant concept called Blaze Pizza this year with locations in Pasadena and Irvine.

Advice for aspiring business owners: Stay optimistic even if friends and family tell you it's a terrible idea, they say. Raise enough capital so you can stay the course without needing to pull out money. Find a good partner.

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