Talenti: Josh Hochschuler

26:31It just wasn't working. And I had some chefs from around town that loved to come and the chefs really liked it and they were asking me, hey, can you make it a really large size for me and I'll buy it from you. I'll sell it at my restaurant. in 2004 so the second year of the store i started doing that i would have a cooler i would sit there and help make it put it in the cooler deliver it to the restaurant and i was doing that and they loved it and it just kept growing i was like wow this there's something here about going this other route this is going to be really helpful and amazing but still i imagine that's not quite making up for the loss no it wasn't making up for the loss we were losing money and this one chef from a very popular steakhouse here in town, which is owned by a gentleman who also owned a little specialty supermarket, said, look, we love your product.

27:28Would you now put it in the container that we can set inside this little specialty supermarket and we'll sell it there? And sales were amazing. And that's when I started to say to myself, I'm being held down. I can't, first of all, I hate the retail life. It was not for me. The way I would describe it was I'm always working when everyone else wants to be having fun, right? Nights and weekends. You were there seven days a week. Yeah, from morning to night. And the most intense times were when everyone would be either having dinner or going out or whatever they're doing. And I'm always working. So I said, wow, this is, you know, I'd rather work when people are working and not work when people aren't working because I want to be able to do things as well.

28:09And you were dating your now wife at the time. So I hired my wife to be the pastry chef at the store. We had a little pastry display. I was crazy about her. It took her a little longer to figure out that she loved me too. As it often does. And we eventually started dating. But this was all in 05. So as I was starting to try to say, maybe I need to start thinking about that there's a better opportunity out there going into this other space of restaurants, which is food service. So you start to basically say, I got to close this store. Yes. This shop. Your whole business model was about building shops all around the country.

28:50That's right. A year and a half in, you realize that's not going to work. It's not going to work. It was heartbreaking. When we come back in just a moment, how that heartbreaking decision to close the shop actually set up Talenti to grow much, much bigger than Josh had ever imagined. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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32:34Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2005 and Josh makes an agonizing decision. He's going to close down his retail gelato shop, but he's still making gelato. He's just pivoting to service wholesale accounts. When you went to your 15 investors and you said, I'm going to close the store and do this, what was their reaction? Well, probably some level of disappointment. But for the most part, I was dead set on making sure they were all whole. So I said, you're coming with me. You're going to own part of this business. But I just think that the opportunity is elsewhere. Again, these were friends and family at the time.

33:14So most people were like, look, we're betting on you. We want to see you succeed. So if you really think this is the direction that it needs to go, and it's sad to see that store close, but let's go for it. Let's try this new angle. Did it feel like a relief or was it were you sad or was it both? All of the above. There was a lot of emotion involved. I had spent quite a long time working on it. I spent long hours there. It was a dream. And, you know, it felt like somewhat of a failure closing it down. I had to let everyone go, including my wife. And I basically ended up moving into a tiny little warehouse, taking the machines over there and had one hourly helping me.

33:56And actually, guy, that move was scary because I had already started to sell to these restaurants in this one store. And you can't just disappear for a while because all of a sudden you're moving and they need it every week. They need the product because they're selling it. And I didn't have a freezer anymore once I was shutting down. And there was a very kind man who owned a frozen distribution company who I asked, do you mind if I put a pallet of product in your freezer? I'll pay you rent or whatever you need. I just, I have to have product to get through the next couple weeks while I move. And he just said, don't worry about it.

34:29You just use it. You don't have to pay me anything. And when you went to your Argentinian partner and you said, hey, we're going to shut down the store. I need to focus on wholesale. What did he say? He totally disagreed with me. Huh? He was very opposed to kind of this new direction we were going in. It's frowned upon down there. You don't take artisanal high-end products and sell them in the quote unquote an industrial setting. So they just lost all interest. The relationship was dwindling. And it just seemed like the right time to say, look, I will do what I can to buy you out. So let's come up with a number.

35:07It might take me five years, but give me time. But over time, I will buy your part out. But I was riddled with debt. And did you, I mean, you had to break the lease, right? Yeah. I had to meet with the landlord and explain to them the plan. And I had to go out and find someone to take over the lease. And I found someone who took over the lease. And then I negotiated with them to buy my own freezer back because it was considered part of the building. So there was a lot of work trying to wind it down. It was a lot of work. Do you remember how much debt you were in? Were you like more than$200 ,000,$300 ,000?

35:43Probably something like that, like$200 ,000 to$300 ,000. As long as you don't consider the fact that at the time there was a lease, right? So I had to figure out a way out of the lease. And the easiest way is to find someone to take it over. Okay, you're 31-ish at the time with this debt. Were you comfortable with that? I mean, were you like, I got this? Or was it stressful? Very stressful. And it just kept getting more stressful because I kept taking on more debt. But you might recall that those years, five, six, seven, banks were very willing to hand out money. Oh, yes, they were. So I was one of those guys that they were handing money to.

36:24had it not been for those times, it would not have qualified. Yeah, they would not have given you the money today. And you couldn't have probably gotten a credit card today with that much debt. Right. And I don't know if you remember this too, but they used to be handing out credit cards, 0 % interest all the time. So I had like 16 of those that I built up. I was able to buy a house with like 5 % down, a little house, and then I took a second mortgage out on that and then put it into the business. So I was doing everything I could to come up with any penny I could to stick it into this business.

36:53And it was all on me personally at that time. And I was carrying the investors because I had told them I would do everything I can to take care of them. There was a couple of capital calls that they had the option to put in some more money. And some of them ended up putting a little bit more money in, but the vast majority was on me. Right, because it seems like a failing business at this point. Without question. So the investors are like, oh, well, you know, I don't know about this. Let's just see what happens. You're taking on debt, but you move into this small space to just make ice cream for restaurants and then that one specialty store with the idea that you would turn this into a business doing like pints, like Ben and Jerry style pints?

37:33Yes, pints to specialty stores as well as the larger containers to restaurants. The plan was we're going to sell bigger ticket items in pint format as well as in these larger containers for restaurants, hotels, convention centers, stadiums, cruise lines, you name it. That was the model. And who was making the gelato in that little warehouse for you? I was. You were making it now. Yeah. I was making it. I was delivering it. I was doing the accounting. I was the lawyer. I was the janitor. I had one employee. She was hourly. And she would help me. So if I'm out making deliveries in my old green Chevy Tahoe, she would stay there and make sure everything's running properly.

38:19And that went on for that year, 2005, that's what it was like. And I can't imagine you're doing more than a few hundred thousand, maybe two, three hundred thousand dollars in sales max. In 2005, I did$175 ,000 in sales. Right. So it's tough business. Very tough. Very tough. I mean, I was selling furniture. I was selling anything I could to fund the business. And keep in mind, I was now dating my current wife. I ended up buying an old beaten up white delivery van and started picking her up for dates in this van. And she's just like, what the hell is going on here? This is crazy. Milk's in the back with sugar because I'd go and buy all my raw materials with the van.

39:04Walgreens and CVS used to have a special where you could buy so much milk at a certain price, but you could only buy so much. They wouldn't allow you to buy more. So I would go around to every CVS and Walgreens and the whole city buying milk and putting it in the back of the van to take back and make gelato. And so anyways, she lived through that whole episode. All right, but your customer's still small, it's a small customer base. It's like high-end steakhouses and restaurants in Dallas, a specialty store, and that's 2005. That's right. And how many different flavors are you making? Do you remember?

39:35Because that's also challenging if you've got to make like 10 different flavors would be more efficient to make like three? Oh, I was making any flavor anyone wanted. I had certain chefs that said wasabi ice. One guy wanted wasabi ice. Whatever you want, I will come over the formula, I will make it and it will be exclusive to you. And I did that for any restaurant that was willing to work with me. So how did, I mean, while you're doing this, you're making the ice cream, you're delivering it, you're hand packing it, because you don't have a, I'm assuming you didn't have the machinery that could pack the ice cream.

40:04No, it was all hand done, yeah. So this is like, this really is a farmer's market business, right? Yes. And this is a point where I have to imagine you're thinking, how am I going to get out of this hamster wheel? Because I'm doing all these things. I've got an hourly employee and I don't have time to do business development or try and pitch other stores or whatever. Yeah, I did have that sensation that that came more about a year later. But yes, in 2006, there was a broker who had seen the gelato. This is like a broker who represents food brands. Who represents Costco. Ah, okay. For Texas. And she called me and said, I love your product.

40:45Would you consider working with Costco Texas? And of course, I was excited, thrilled, said yes. And the first thing they said is that the only way to get in is to do something called roadshows. So you would actually go to whichever store it was, set up a little stand, and sit there and sell your product to everyone who's shopping in the store. So I did that for a very long time. I drove around the entire state. So at the time, I did have Costco as a customer on a very limited basis for a short period of time. It was very, very helpful. And we were getting new restaurants. And that specialty store that I had been in had expanded.

41:22They had several locations in different areas. They had all picked up the product. So I had like five or six of those as well. That year we did 430 grand in sales. So things were growing and I was starting to take on more help, employees at the warehouse, and sales were building. Okay, this is 2006. And that specialty store, which is really where it all began, now they're growing and they're ordering more ice cream. But apparently they're having problems. The specialty chain is behind the scenes. They're having financial problems. Yeah, I did not know that. I got into this bad cycle where you allow for a customer, let's say you have 30-day terms where whatever they buy from you, they can pay you 30 days later, where they would go beyond that time frame.

42:08And you would let them slide. And I'd let them slide because I wanted to be able to sell to them. There was always the fear that if you lay down the law and say, I'm not going to deliver until you pay me what you owe me, that you lose the customer. It is a dangerous slope. And that is exactly what happened. I got way past 30 days, past 60, probably past 90. So I had, it was a very important client of mine, and I didn't know how to kind of get myself out of that situation. And so what happened? So towards the end, before they went bankrupt, they ordered this huge order, like way larger than normal.

42:44They received it, and then they marked it way down and sold it off, but I never got paid. So it was really bad for the business. that and then a couple of the restaurants had gone out of business as well. I was owed a lot of money. And it was getting close to Christmas time. Everyone who worked for me celebrated Christmas and it was an important time for them. And I was completely out of money. I basically didn't know how to make payroll. I owed payroll. 15 employees you had roughly? Roughly. And so I remember I called a meeting and I said, everyone, let's huddle up and talk. and I said, I'm going to go to the bank and I'm going to try to sign and get more money from the bank to pay you what I owe you because I don't have it right now because of what just happened with this big customer.

43:29But it's going to take a week or two weeks, 10 days to get this done. If you leave in the meantime, I can't even service the customers I have and I'll lose them as well. So I really need you guys, please, to give me some time and I will pay you what I owe you. and I know the timing's horrible. So they spoke amongst themselves and then came back and said, we trust you. We're going to stay. Go find the money. And I said, you got it. Okay, how did you find the money? Went to the bank, signed for more. And they gave you money. They gave me more money. Even though you were heavily in debt, they gave you money.

44:04Oh man, the early 2000s. What a time. What a time. It was unbelievable. But it was like a personal loan you took out or what? Yeah, personal loan. And I remember because I'd been waiting to get the news, waiting to get the news, waiting to get the news. And it was amazing news. And then, of course, we stayed in business. But it was a moment. The entire time, every time I would call my father and say to him, you know, this is happening and this is hard and I'm worried about this. And he'd say, you keep going. It will work out. You keep going. It's going to be fine. And this time I called him and he said, you know, maybe you're going to have to close the doors.

44:39And that was just heartbreaking. But we didn't. We made it through. It was a real crisis moment. I mean, it must have been, it was a loan that was big enough to cover payroll, but it was not, I imagine it wasn't a giant loan. It was probably a couple, you know, a few, maybe$10 ,000,$20 ,000. I think it was more than that. I think it was like$70 ,000 or$80 ,000, but it was way more than they probably should have given me, but they did. Back then it was like, why do you only want$70 ,000? You know, take$80 ,000. It worked out for me. It saved the business. But you are still, okay, so now you've got some cash to keep the business going.

45:11You're in Costco. A few Costcos in Texas are doing these roadshows. Being in Costco must have given you visibility because that's what happens. Like other people who work for other brands will see you somewhere and they'll say, oh, this is an interesting product. Did any of that happen? Did you start to get contacted by other grocery companies or – yeah. Yeah. So that is true. That's helpful. But it's also if you can have good numbers and show what you're able to do and tell the story, it's incredibly helpful in sales meetings. And so that's the point when we started going around and meeting literally in the stores with the Frozen Isle manager, who could be a teenager, and saying to them, look, we're selling here, we're selling there.

45:56Let us go on yourself. Try us out. And that was starting to go into 2007. And that's kind of how we started getting more and more stores in 2007 was meeting with the frozen aisle manager. But these aren't independent grocery stores? So Whole Foods was way different back then. Each store had a lot of autonomy and they were able to take us on. So that would be one example. But there was some other specialty stores that were just getting started. Maybe you've heard of Sprouts. Of course. At the time, Sprouts had very, very few locations. They were out of Arizona, but they had come to Texas and they had opened, I think it was two locations in all of Texas.

46:35And so that would be another example. So we were able to get into these kind of specialty markets that had the autonomy to be able to make these decisions and put us on shelf. Let's talk for a moment about the packaging, right? Because part of, I think, of what's really distinctive about Talenti is the pints, right? Like the clear plastic containers where you can actually see the gelato, right? And it makes the brand stand out on the shelves. I mean, what was it packed in at the time? So way back in 2004, when I started at that first specialty store, in the very, very, very beginning, I was doing it in those little tiny styrofoam containers that they use in other countries often.

47:19Shortly thereafter, I had gone to a trade show. It was actually in Italy. They had a new display case that rather than having metal pans, it was made out of transparent plastic. That pan allowed for you to see the ribboning, all the different swirls, the bits and pieces, the inclusions. And so I was like, wow, I should try to do something like that on the shelf in a supermarket. So I came back and I found a jar and I showed it to my wife. And I said, what if I were to package it in this? And she said, that's a terrible idea. That looks like a urine sample jar. No one's going to ever buy anything from that.

47:57But I wasn't discouraged. I said, no, no, no, it's going to be great. You'll see. Watch, watch, watch. So I came up with the pack. That was pretty early on. That was still in 04. The concept of not being in cardboard when there was a sea of cardboard and coming out with something completely different that would hopefully generate trial started pretty early on. It started in 04. Okay. So 2007, you get into more Whole Foods locally and then Atlanta and Denver. Business is starting to pick up. How are you financing this? I mean, again, these businesses are paying you 30 days. You've got to make the product, deliver it, and you're not a cash-rich business at this point.

48:36So I imagine you're once again running into challenges. Yes, finances were very, very tight. And then the salesperson that we had knew of a friend in Minneapolis, and he helped us get a couple of chains in Minneapolis. And I knew that I couldn't just keep going into further debt. And I had started to go out and try to find a more sophisticated investor, a bigger investor to come in and put in some real money to give relief to these investors that I've been carrying since the days of the store. And did you want just investors or did you want operators to come and work with you? I really wanted smart money.

49:20I was trying to find someone who I thought could bring a lot of value. I started to feel like I really don't know what I'm doing, and I need someone who has more experience in this who can show me the way. I think I have a great product, and I've got all the energy in the world to go and make it happen. But I don't know exactly how that works, and I need help with the expertise. Okay, so you're looking around, and you get somehow connected to these guys, Steve Gill and Eddie Phillips. Before we talk about who they are, how were you connected to them? So in 2007, a friend from college was in town.

49:55He had done public relations for Steve and Eddie at Belvedere Vodka when they still owned it. These guys had founded Belvedere Vodka? Yes, and Chopin Vodka. Okay. At that point, they no longer owned them. They had sold them. They sold them to Louis Vuitton, Louis Hennessey. But they were kind of now wanting to do something again. But I didn't know that. But this friend of mine from college had come to Dallas and we were together. And I said, he said, what are you going to do? How are you going to finance this thing? Things are going well as far as the top line, but it is unsustainable what's happening here.

50:30And I said, I'm so anxious, so much need to meet someone. You know who would be perfect is these guys that you just did this PR for. And he said, well, hold on. I'm friendly with them and picked up his phone and called them and said, hey, Steve, you should meet this guy, Josh. He has a business site. He'd love to tell you about it. And you thought they would be good partners. I mean, you didn't know yet, but you thought – I mean, they were in alcohol. It was a completely different business. But you thought, look, they built two great brands. They might be good to work with me. Absolutely. I saw a lot of similarities.

51:01I saw their brand. They came out. They were much more expensive in the competition. We were more expensive in the competition. Not to that extent, but we were more expensive. They invented the bottle that you could look through the window and see the image on the back. So they had this innovative packaging. I just was like, these guys know a lot about branding and they've had tremendous success. They've been down that road as entrepreneurs. So I called and said, you know, I really want to come meet with you guys. I had just had my first child. And they go, come, come. We'll give you a few minutes.

51:35And in their minds, they were just doing this PR guy a favor. There was no real thought of that anything would come from this. But I went there and I sat down in their offices and I was very intimidated at the time. I'm sitting there. There's a massive office and they come walking in this huge boardroom table and sat down and they're like, all right, you got a few minutes. Tell us what you're thinking. And for some reason, they thought it was a retail concept and they were not interested in retail. But then I explained to them, no, this is wholesale. This is wholesale and this is what we're doing.

52:07And they're like, oh, we like it. Then I had brought product with me and I had them taste it and they loved it. They thought it was amazing. They loved the pack. And they said, make us a proposal. And I guess they ended up putting in a million bucks into the business. Yeah, there was like, we needed to sign some, get some bank loans or line of credit or things like that. So their balance sheets helped with getting approvals on those things. And so, but yeah, they put in money and they bought out all of my original storefront investors. When we come back after a quick break, how this fresh investment marked a new phase of Josh's business and eventually lead to a phone call from one of the biggest consumer products companies in the world.

52:52Stay with us. I'm Guy Raz and you're listening to How I Built This.

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54:49Hey, welcome back to How I Built This. I'm Guy Raz. So in 2007, Josh brings in two seasoned entrepreneurs, Steve Gill and Eddie Phillips, as investors in Talenti. And at first, the idea was that the pair would simply be passive investors and board advisors. But soon, that arrangement would change. I think it became clear pretty quickly that it would be much better if Steve got involved in operations. It didn't take long to figure that out, mainly because I think he's an incredible operator. He really knows how to build and run businesses. He became like a business mentor for me. And he was just a natural at leading and a lot of marketing and sales as well as finance.

55:37He's very, very strong in those areas. All right. You brought in that money fortuitously because we're about to enter a dark period in the, you know, starting in 2008 with a financial crisis that would last at least two years. How were you affected by this significant downturn in the economy? Oh, it was horrible for us. A few things had happened. There was a large sale that was made to a distributor. The understanding was that would then go to these different customers. What wasn't realized was that had it not been sold to those customers, we get it all back. So we got that sent back to us and you can't then resell it.

56:16So that was trash. So that was a hard one. Steve really took over most. I would go with him, but he was heading up VP of sales, managing sales. I really dedicated most of my time to product and manufacturing and more of the trade. And so we lost money. We lost considerable money that year, a lot of bad debt. And there was no more money out there. By the end of 08, there was nothing left. And so you were making more product because you were growing, but you couldn't finance it. Right. So by 2009, I mean, now again, Steve and Eddie, these guys had made money, a lot of money selling Belvedere and Chopin vodka.

56:59So now I'm assuming they become the bank in 2009? Absolutely. So the end of 08 till through 09, let's call it. And that was the period of needing to live to see another day. And those two gentlemen, for the most part, funding that. But what was it about this? I mean, I'd have to ask them, but why did they believe in this business so much? I mean, vodka makes sense to me. It's shelf stable. I mean, it's complicated. You're dealing with a highly regulated business and industry. But you don't have to deal with putting it in cold storage and it going bad and shelf life. And once it clicks, you're good to go.

57:42Ice cream is tough business. I mean, these are smart guys. What attracted them to this thing? Again, you would have to ask them. But my best understanding from just having spoken to them about it is they liked the size of the category a lot. It had been boring for so long. Nothing had happened in that category forever. It was Haagen-Dazs and Ben & Jerrys. Yeah, forever. So it was exciting to come and disrupt and then start taking away enough market share to just completely become a nuisance to them until they have to buy us. And so they had been through it. They had been wildly successful and they thought that they would be able to, together with me, repeat that series of events.

58:27That eventually they could sell it to a bigger brand. Yes. So, okay, so they're excited about this category. They see potential and they see the possibility of one day maybe selling it to one of these bigger companies. But in the meantime, you've got to finance the business. What was the playbook here? Okay, so you've got the financial crisis. But you've got to grow. And so you have to invest in factory equipment, automation. You can't hand-pack this stuff because I think you were still hand-packing it in 2008. There was an evolution of the packing. We went from packing with a spatula to where we moved to what's called a continuous freezer.

59:08And it would actually flow out as if it were coming out of a hose, which made it easier to pack. But still was not automated. We did not automate. Oh, you had to hold the hose yourself? You had to hold the cup underneath the spigot. It was like in the kitchen faucet and fill and then put the lid on and then keep doing that one by one by one by one. Yes. And we had multiple of these machines, so we were not doing one at a time, but each machine would do one at a time. And we didn't really automate to fillers until pretty much 2012. So, okay. So 2008, the money dries up from the banks. You've got 2009.

59:45And that year, based on the numbers I've seen, you go from to 6.8 million in sales. That's right. So that's significant. Did it still feel scary or were you feeling more confident? Like, OK, we're turning a corner here despite the financial crisis. I would say it was either the end of 2009 or 2010 when it was feeling really good. The big turning point of 09 was that we really wanted to get into Publix, which is a chain in Florida. Yeah. Why did you want to get into Publix? Publix, it's looked at as a leader in the industry. People focus on what they're doing. They're trendsetters. It also is in Florida.

1:00:29And Florida helps offset the seasonality of the business. Because people always eat an ice cream. And especially, you know, they get the snowbirds. They get a lot of people in the winter when we don't have much going on elsewhere. So that's a huge plus. They have a ton of locations. They own Florida. So you had the ability to do tremendous business with them. And we wanted to be able to show a win at a big chain. What ended up happening was we went and pitched to them. We get a phone call from the broker and he said, I got bad news. Unfortunately, they decided not to go with you. This was in the very beginning of 09.

1:01:07And we said, no, no, no, no, no, no. Cannot be, cannot be. So Steve said, call the buyer and tell him, I just want 30 minutes with the guy. Any 30 minutes he wants, I just want to talk to him face to face. Get me a meeting. So he calls us back and he says, you got your meeting. That's the good news. The bad news is it's tomorrow morning, like 830 in the morning. And we're sitting in Dallas, Texas. It's five something in the afternoon. So I'm like, oh my God, go to the airport. Go to the airport. So he just gets in his car. So he's driving to the airport. At the time, you could not go into Publix without wearing a suit and tie.

1:01:42So I call his wife. And we're saying, grab a suit. Grab a tie. Stick it into an envelope in a FedEx. Go to a FedEx location. And within a short period of time, I will have an address for you. So we find some little motel, hotel on the side of the road. Have her overnight at first thing delivery by 7 a.m. He catches the flight, gets there, puts on his suit, makes it to the meeting. tells the guys, you've got to give us a chance. You have to let us in. We are going to make you look good. We're going to sell well, and it will be good for your career. So he says, well, how are you going to do that?

1:02:15And he says, well, you know, I have done this before, but we're going to do it. And he goes, no, I want to know how. And so Steve just goes, radio. And he goes, really, radio? He goes, yeah, radio. He said, well, how much are you going to spend on the radio? He says,$500 ,000. So we ended up getting the business after that meeting, and Steve calls me, and he says, good news, bad news. Good news is I got us in. And I'm like, oh, amazing, amazing. He goes, bad news is we've got to come up with$500 ,000 to pay for radio that I just guaranteed them. Wait, wait. Basically, Steve's pitch then was take our product and we'll go and sell it with radio ads?

1:02:48Exactly. And what did the ad say? Because it's a visual thing. You see the ad. You want to taste it. But what did the radio ad say? I think I still have them. I'm going to send them to you. But they're really funny. The ads themselves talked about that there was a clear jar on the aisle. So it talked about the pack and it talked about the brand. People ask why Talenti Gelato and Sorbetto come in a clear jar instead of a typical carton. Well, we're showing off. We want you to see nothing except the finest all-natural ingredients sourced from all over the world. And it played over and over until that buyer called us and said, you weren't kidding about your spend.

1:03:25I can't get to work in the morning without hearing your ad on the radio. Look for Talenti Gelato and Sorbetto at your local public supermarket where shopping is a pleasure. And did it have an impact? I think it did. I mean, our sales were great. We came out of the gates just blazing, and it just kept going up and up and up. All right. So 2010 really is when you start to see the light now. You're really growing. I think by 2011, you're doing$26 million in sales. and I imagine really supercharged by the Publix in Florida. Yeah, we took that success and went around to all different chains. Kroger's the biggest.

1:04:07And we started gaining distribution just across the country and a lot of sales. People were buying it. So clearly this playbook is working and people are discovering this ice cream. I think you hit$95 million in 2013 and the team is just exploding, right? And are you, were you technically or officially the CEO of the business? So I think for a while it was Steve was CEO and I was president, basically running it together. Eventually, as we hired more C-suite on, I took on the title of founder. But until the very, very, very end, it was Steve and I running that business. And did you like, did you, It sounds like that was a better arrangement for you.

1:04:54Like you had been doing operations and payroll and admin for so long on a smaller scale, but it's a grind. Yeah. I came to the conclusion that there was a concept where there's certain people that like to do businesses on their own, and I don't like that. I like having a partner because both in the hard times and in the good times, I like being able to share those times with someone who knows every single detail of them, that there's nothing that you have to explain. So traditionally, once a brand reaches 100 million in sales, it really starts to get the attention of the big players, right? Because it's growing, and it's not maybe not yet a threat, but it is certainly a competitor now.

1:05:35and you guys reach almost 100 million sales in 2013. And I imagine that's when you start to see maybe interest from outside companies or maybe you guys start to approach or hire like a law firm to see if there might be any interest. So we hadn't approached anyone. The business at that time was owned by three people. It was me, Steve, and Eddie's son had inherited his shares. And Eddie Phillips had unfortunately passed away in 2011 and his son had taken over, a guy named Dean, Dean Phillips, who actually became a congressman and then briefly ran for president. That's right, Dean Phillips. Yep, yep.

1:06:19So we weren't actively looking to sell the business. In fact, we felt as though it was still growing really strongly. And no serious competitors yet. I think Haagen-Dazs was starting to launch its own gelato and Breyers would. But, right, there wasn't any head-to-head competitor yet. Yeah, and it's hard to come out and be behind the original authentic one. So, no, we weren't. But then Unilever actually came to us. They came to us in 13. They said, this is the call you've been waiting for. They said, we want to buy your business. And we're like, well, it's not for sale. We're not selling. Wow. And that started this at least, I think it was a year and a half, back and forth with those guys.

1:07:03We just didn't feel like we were ready to sell yet. Why not? You know, I think you start thinking to yourself, is this a business I want to run for a very long time and bring my children into it and make it a family? Because you're like 40, 41 at this point. Yeah. Yeah. And I was having children. Do I want this to continue and then expand it into different novelties or what have you, other products and bring my sons in and make this kind of my life's journey? Or do I want to be more of that serial entrepreneur? And so that was a lot of the thinking. My father had a lot of influence on me and he thought it was a good idea to take some chips off the table.

1:07:50Yeah. Although the company was very profitable. But we just kept pouring it all back, right back into the business. But you were making a decent salary probably by that point. Yeah, yeah. I had a nice salary. I was able to go out for dinner. But in any case, and my father said, look, I don't care what you're worth. It doesn't matter to me if you have money. He says, I just think that to be able to sleep well at night, it's nice to have an estate that you can depend on. And I'm just proud of you because you're a good person. And that meant the world to me. And that helped me get over that. So you decided, let's investigate this sale.

1:08:25Yes. It wasn't just me alone, but yes, it was a lot of back and forth. We kept thinking, oh, this time we'll get there, this time we'll get there. And we were too far apart. So it took almost a year and a half, I think, before we were able to finally say, okay, we're ready to do this. Right. I think in December of 2014, Unilever announces that they've acquired, they will acquire Talenti. The acquisition figure is undisclosed, but it was a lot of money. And you had some incentives to stay on, I think, for roughly two years. That's right. First of all, coming into, you know, now you're, I mean, you're 41 and have enough money to stop working at this point.

1:09:14How did that change your life? did you buy a bigger house or did you were able to you know you were able to do those things for example was able to be more charitable in my giving that was something i'm proud of ended up buying a ranch so some land outside of dallas yeah kind of like a nice place for the family to get away on the weekends here or there play sports fish that sort of thing so i I guess that would be a material difference. But my wife said to me, go buy something. You just did this, go buy something. Go buy yourself a watch. Go buy yourself something. And I said, I don't know, what am I going to buy?

1:09:58And she goes, just figure it out. You got it. I insist you buy something. So that last night when we sold the business to Unilever, we had gone out. The investment bankers were ordering McAllen 25. That's an expensive scotch. It was something like, God, I don't know,$250 per ounce that they were drinking. Anyway, so they're passing it around. They're like, everyone smell it. Don't drink it. Just smell it because it's too expensive. You can't drink it. So then they down it. And next thing you're, everyone's laughing. And they bought everyone a round of this scotch, which I was never able to afford before that.

1:10:29I'd never tasted it. So I said, you know, that was such a fun night. I would like to go buy a bottle of that and hold it for special occasions. And so that's what I did. I bought a bottle of that. That was how I celebrated. And whenever I open it, whether that be a birthday or a big milestone in someone's life, we always write down on the bottle why I'm having a sip of it to celebrate the date and the event. That's a nice tradition. Buy a$2 ,000 bottle of scotch and then write down every time you take a little sip of it. Yeah, exactly. So you end up – now you become an employee of Unilever for at least two years.

1:11:07And imagine they just have you run in Dallas, right? You don't like move to Hoboken or London or Rotterdam or wherever their offices are, do you? No. And part of the negotiation – so Steve had been through the whole Belvedere experience and they wanted him to live in Paris. And then they were like counting his days of vacation. And so like he didn't want to feel like he was going back inside some sort of cage. So the negotiation involved a lot of freedom on our part. However, they knew that we were incredibly motivated to see this through. Because you had incentives. Big time incentives. So we were incredibly motivated to work very, very hard and make sure that they were left with a beautiful business.

1:11:51And so by the end of 16, we had hit$245 million in sales. And it was extremely profitable. And they got what they paid for. And at that point, you were like, okay, this is fun, but I really don't want to work for a big company. Right. I stayed on for three years as a consultant with a number, a handful, maybe a week or two a year. I would be involved with them. And they were great. They were a very, very stand-up, impressive organization and company. So I'm very happy about that. It made me very proud that the person who took over what was like my baby was a company that makes me proud. We talked a little bit about your personal life.

1:12:29You got married and raised a family throughout this whole building this business. But I think you now have, what, five children? Yeah, five kids. Yeah. Wow. Three boys and two girls. All under the age of? The oldest of 17. Right. So the oldest really was on that journey kind of with you, right? And some of them were probably born after the acquisition. Yes, for sure. The youngest two, both girls, were born after. And how did you just as a dad manage that? I mean, I believe that your wife was sort of manning the home front for a lot of that. But, you know, I imagine you didn't want to be away from your kids.

1:13:10So how did you manage being a dad and having, you know, the responsibilities of raising a family while also running a business and trying to get this off the ground? So there's nothing more important to me than family. And I am incredibly involved in my children's lives and together with my wife. But I definitely was a workaholic for a long time. And it was about February of 2006 when my wife and I decided that we would start keeping Shabbos, which is… The Jewish Sabbath. The Sabbath, yeah. Which means you do not use electricity, you don't answer the phones, you don't drive. Correct. Yeah. All of the above.

1:13:50So you started this in 2006 when you were not in a secure position in the business at all. I was terrified. I left. I remember leaving that Friday and thinking to myself, you know, what happens? You know, how is this going to work? Like what happens if there's, God forbid, a fire or, you know, it's an important day of the week, Saturdays. And it took a very long time to get over this. I'm not going to work for that day. I'm done working. I will have faith in God that the business will be okay for 25 hours. And it really helped our home life tremendously because as my wife used to joke, she's like, thank God for Shabbos.

1:14:31I wouldn't get to see you otherwise. So she knows she has me that time frame together with the kids uninterrupted, completely focused on our faith and our family. And this is a thing like there's so much research around this, right? People who take a day off or, you know, who meditate or who just unplug. And lots of people do this, whether they're religious or not. And it sounds like you credit that with even though I'm sure it was you were anxious at the beginning, right? Oh, what's going on? It's I can't manage my phone. But I'm sure over time it became like this really meditative day of rest, which is what, you know, right?

1:15:11God created the world in six days and then the seventh he rested. So there's a reason behind that. Yeah, it's hard for me now to imagine any other way. Completely look forward to it. Kind of resets everything perspective and on life and et cetera. So, yeah, now, I mean, once you get past the initial fear and you can have real trust and faith, then you move on and you learn to love it and live it and enjoy it. So it plays a huge role for us and for our children and for the way that we raise our family. So basically every time you, you know, from starting in 2006, whenever you work with somebody or even when these partners came on 2007, it was very clear.

1:15:49Like, listen, you need to know I don't work on Saturday. I don't answer the phone. I need electricity. It's non-negotiable. You could say that at the front and sort of set expectations, I guess. Yeah, yeah. Well, Eddie Phillips was Jewish, so he understood a lot of what was important to me. Steve has enjoyed the kind of learning about this and being involved and speaking to me about it, etc. And funny enough, during Passover, there's certain rules. You're not allowed to own certain things, one of them being food that you're not allowed to eat during that period. So I would have to sell him the business and he would have to give me$20 and have a handshake.

1:16:29And the rabbis would have to see that this was happening with the handshake through a picture. And so after a number of years, he said to me, is this real or you just want$20 from me every year? What's going on? What's going on? So we've had fun with it. We've had fun with it. So, Josh, when you think about this journey, right, starting this thing and really came out of not having a job at Bank of Boston and all those years, I mean, it took a long time. It started this in 2002, opened up a shop in 2003, and it really doesn't start to fight its legs until 2010. So it's not – it's a long journey.

1:17:07When you think about that, how much of it do you attribute to luck and how much do you think has to do with the hard work you put in? I don't attribute to luck. I do think I've been blessed, very, very blessed. And I think it's a team effort. But I feel extremely fortunate to God for the blessings in my life. And there's been this common thing that people like to call it an overnight success. But I say, yeah, it was a 15-year overnight success because it wasn't just from one day to the next, like you said. There was a tremendous amount of hard work. It was a rollercoaster ride and it was scary.

1:17:46And I think that's how a lot of these entrepreneurial businesses go. It's just so different from being an employee that you expect to get a check every two weeks. When you go home and you worry about could there be a fire or, you know, is there – I can't get robbed. There's just a different set of concerns that you have when you own. And starting a business is hard. And it takes tremendous amounts of work and a lot of good fortune. That's Josh Hochschuler, founder of Talenti. By the way, since selling to Unilever, Josh and his business partner, Steve, have been involved in a few other food-based ventures.

1:18:24But then, during COVID, Josh got really into gardening as a hobby. So today, he's working with Steve and Steve's brother, Mark, on a business in a totally new industry. It's called Greenacres Nursery and Supply. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at gyros.com or on Substack. This episode was researched by Kerry Thompson and produced by Casey Herman with music composed by Ramtina Rablui.

1:19:03It was edited by Kevin Leahy. Our engineers were Patrick Murray and Robert Rodriguez. Our production staff also includes Alex Chung, J.C. Howard, Chris Messini, Carla Estevez, Sam Paulson, Andrea Bruce, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

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