RISK RIGHT

How Kat Cole went from a Hooters waitress to the president of a billion-dollar brand

By the mid 1990s, in malls across America, the smell of a sweet buttery cinnamon roll was a staple of the food court.

Cinnabon’s eponymous confection is 880 calories. It’s the size of your face and it is delicious. But by 2010, increasingly health-conscious consumers and a recession that kept people out of malls and airports, meant that franchises faced flat and declining sales. Cinnabon needed to do something new, so it launched project 599.

The goal of the project was to reduce calories in the Cinnabon. Innovative bakers came up with a prototype that clocked in just under 600 calories, but it was made of artificial sweeteners and stabilizers. In 2011, Kat Cole, then president of Cinnabon for barely a year, yanked the initiative. The new roll didn’t taste as good. Instead, the chain kept the original recipe, and mandated that franchise owners offer smaller versions, called the Minibon, which is only 320 calories. The smaller rolls already existed, but at that time fewer than 15% of the 860 franchises offered them.

The franchise owners were skeptical; the brand was famous for bigger rolls. If they sold a smaller roll they’d have to offer it a lower price, $2.50 instead of the normal $3.60, which could means smaller profits if more people opted for the mini. It also meant investing in new baking equipment to make the smaller roll. But Cole convinced the franchise owners that while smaller rolls would mean a cheaper menu option, it would also mean a larger volume of sales to make up for it. She was right. Sales of the original barely dropped while overall sales went up over 6%, in large part because of the Minibon.

You can’t make a change like this without taking risk. No one knows that better than Cole, the 38-year-old is a president of Focus Brands, the parent company of Cinnabon, Carvel ice cream, Auntie Anne’s pretzels, Moe’s Southwest Grill, Schlotzsky’s, and McAlister’s deli. Cinnabon continues to thrive, while similar fast food companies like Krispy Kreme and Cold Stone Creamery have floundered or failed when they tried to expand and innovate.

Cole never would have gotten where she is if it weren’t for a few key risky decisions. But what sets Cole, and other successful people, apart isn’t that she takes risks but rather how she approaches risk. She says, “It’s great to jump off the cliff, if you are willing to build the backpack as you are going down.”

Jumping before you are ready

Cole was born into what she describes as a “Jerry-Springer” childhood in Northern Florida. But by age 32, she was running an international, multi-million dollar company. She now divides her time between Atlanta and New York City, projects both warmth and confidence and frequently peppers her speech with her own catch-phrases.

Cole’s first major risk was dropping out of college. After a chaotic childhood—her mother left a bad marriage with her three daughters and no clear way to support herself—Cole chose the most stable career path possible. By age 18, she was studying engineering at University of Northern Florida and planned to become a corporate lawyer. To support her studies she worked as a waitress at Hooters.

By her own description, she was a great Hooters waitress: she took initiative and showed leadership. When the kitchen staff walked out, she fried the wings; if the bartender couldn’t be there, she made drinks. The following year, when Hooters corporate called and asked the manager who the best employee was, she named Cole. Hooters wanted to send Cole to Australia for two weeks to open a new franchise.

Until then, she’d never been on a plane let alone outside of Northern Florida. Soon Hooters was flying her all over North America, the Caribbean, and South America to set up new locations. But Cole’s school work suffered; she was failing classes. She had to make a choice: Drop out of college, give up on her dream of becoming a corporate lawyer, and disappoint her mother or stop traveling for Hooters. She was still an hourly employee and Hooters wasn’t offering a clear career path.

Yet she didn’t give it a second thought. She dropped out of college two months shy of an Associate degree. She says, “The reason it [dropping out of college] didn’t feel that risky was I had a compelling alternative. I was traveling around the world so much, doing things I loved, and was clearly good at earlier than most people are.”

Today, lots of great business stories start with a college dropout. Bill Gates and Mark Zuckerberg each dropped out of college and changed the world. But for Cole it was different; she didn’t drop-out of Harvard full of great connections or have a affluent family to fall back on. But Cole did have something in common with these other famous college drop-outs: the decision to drop out was not as risky as it seems.

“I did believe if it [getting a college degree] becomes important I can figure it out. I can go back.” After she dropped out, she still took online classes and got every accreditation she could in case she decided to re-enroll. She didn’t need to—Hooters soon offered her a corporate job in human resources. At age 20, she move to Atlanta and was promoted to vice president for training and development a few years later.

She eventually earned her MBA from George State University, without an undergraduate degree. She never lost sight of the goal—success and learning—she just took an unconventional path to get there. She adapted as each opportunity presented itself, but kept her options open too. Cole left Hooters in 2010 and was named president of Cinnabon in 2011. Four years later she was appointed a president of its parent company Focus Brands.

Cole’s approach to risk

The fast food industry is struggling to redefine itself at a time when consumers want healthier options. Because the market is limited, one company’s rise normally means another’s shrinking market share. Restaurant analyst Aaron D. Allen, CEO of Aaron Allen & Associates, says smaller, newer, and more nimble companies like Chipotle or Sweetgreen have an advantage in this environment. It is easier for them to deploy new innovation and source better ingredients. Many fast food companies, like McDonalds, have struggled to find their place in a market that puts a premium on fresh, healthier food.

But Cole’s risk taking paid off. The Minibon was a success as well as partnerships that expand the reach of the brand. The company has developed a cinnamon air-freshener, a cinnamon-flavored vodka, and a cinnamon-spiced Keurig coffee blend with corporate partners. According to data compiled by Allen, in the four years she was president, Cinnabon’s sales (which includes sales from franchise units and consumer products) went from approximately $600 million to over $1 billion. Allen says of her success at Cinnabon: “it’s a testament to her leadership, youthful energy, and success at taking risks.”

Cole explained some of the core principles that define her approach to risk:

1. Stay focused on the goal. First and foremost, remember why you are taking a risk in the first place. In the case of project 599, the goal was increasing sales, not cutting calories. A diet Cinnabon wouldn’t increase sales because it is contrary to a brand that is all about decadence and indulgence. “It is easy to forget [the goal] and make a change for change’s sake,” says Cole. But taking risk successfully requires staying focused on why you need to change in the first place and what you need to do to bridge the gap between what you want and what you need.

2. Fail fast. Cole celebrates failure, but in a different way than Silicon Valley’s “fail forward” mantra. She isn’t so flip. She sees failure as a learning process and takes steps to minimize its costs as she goes.

She says good risk management is not carefully thinking through everything that can go wrong in advance and preceding with your new initiative in bubble wrap. It’s a waste of time and nothing will ever get off the ground. There’s too much uncertainty you can’t anticipate and you don’t know how something will go wrong until it actually does. The key is to take the leap. “Say yes to things before you are ready. There’s no certainty or full preparedness” to get something right. You need try things several different ways, learn, and figure out what works.

She carefully monitors how things are going and is humble enough to change course quickly if something isn’t working. Cole loves the expression “fail is an acronym for first attempt in learning” and maintains that your final innovation should be the sum of a process or successes and failures.

3. But still do your research and work hard. Reflecting on the first big leap she took at Hooters:

“To go to Australia I didn’t have a passport, I’d never been on a plane, never been out of the country. I still said yes, BUT I worked my ass off and I did all the research I could so when the time came I was as prepared as possible. Risk for risk’s sake without the hustle muscle does not lead to positive evolution, it leads to jumping off the cliff, not getting the backpack built, and dying. You need to be willing to do the hard work to close the gap between what you have and what you’re not sure you have. What you need to survive or thrive, I think, is the part of the story of risk taking that is never told.”

Innovation at Focus takes a similar approach. They take well-informed chances and learn as they go. They rely on market research and listen to franchise owners. Cole says franchise owners often come to her with ideas too. You may not be able to plan for every contingency, but you can tell in advance what’s going to be a bigger risk, and plan accordingly.

4. If it’s a big risk, start small and demonstrate success. Cole likes to say: “Starting small isn’t walking away from the goal, it’s taking a step forward.” Cinnabon often rolls out new products or processes to a few favored franchises that are open to experimentation. They see how it does and then build on their success by rolling it out into other franchises.

5. Build a coalition of the willing. It isn’t enough for Cole to take risks, she must convince the 1,340 franchise owners to adopt whatever new innovation Cinnabon comes up with. It’s not always easy—they are small business owners, operating on razor-thin profit margins. They don’t have much money to invest in innovations dreamed up by the corporation.

Cinnabon can force change on the franchise owners, but mandates crush morale. Allen says a contentious relationship between franchises and corporate has been a major challenge for McDonald’s, who created too many new menu items that compromised speed and didn’t sell well. Franchise relations has also been a challenge for Burger King and led to Cold Stone Creamery’s struggles. Allen says Cole has some of the highest approval ratings from her franchise owners.

Cole tries to convince franchisees to take risks by building a “coalition of the willing.” Often it comes from starting small with the franchise owners open to experimentation. Their success with a new innovation makes it easier to roll it out to more skeptical partners. She says you need to push innovation in ways that are “small enough to change, big enough to matter.”

6. Stay true to who you are. Taking a risk requires stepping outside of your comfort zone, but it should always be consistent with your core values and character. One reason innovation has gone well at Cinnabon is that it has always stayed consistent with the brand’s identity: sweetness and decadence. A diet Cinnabon undercut this message. Cole decided, in this health-conscious world to double down on decadence and promote Cinnabon as an infrequent indulgence. Cole also boosted revenue by partnering with other companies, selling their products at Burger King, partnering with Jim Bean to make Cinnabon vodka, and cinnamon-flavored International Delight coffee creamers. According to Allen, non-franchise sales which include branded partnerships, licensing, and consumer products account for well over half of Cinnabon’s global sales. But Cole also says no to partnerships that undermine who Cinnabon is, like a mouthwash partnership agreement.

“That’s where so many brands go astray, they go a bridge too far in their innovation. I am not saying some brands shouldn’t blow up their model, but then they should blow it up. If you’re McDonald’s and you’re trying to innovate, you can’t progressively convince the consumer that you’ve got healthy food that isn’t processed, because you’re McDonald’s. You’ve got to literally blow it up and open one unit, call it the McDee’s fresh café, and everything in it has to scream these are healthy ingredients.”

Higher minimum wages, fresh food, and new technology poses challenges but also opportunities for the fast food industry. An ability to take risks well will be vital for any brand to survive and thrive. Now that Cole is a president of Focus brands she’ll see if her risk strategy can scale across multiple brands from ice cream cakes to tacos.

 

Correction: A previous version of this story referred to Cole as CEO. She was the president of Cinnabon and is now a group president of Focus Brands.

home our picks popular latest obsessions search