SPEAKER_01: 0:02

Okay, so we're live. Woohoo! Welcome. So this is our first live stream here from Hill Country Chocolate. Uh, Dan and Melanie are going to answer questions about how it is to run a manufacturing business in the Texas Hill Country. And this is raw. This is live. And we're going to answer questions both from you and questions that we receive all the time. One of the things that come that came up that we really started to kind of hone in on is that we always get questions are Are your products made from scratch? And the answer is yes. We try to do everything from scratch that we possibly can. But I think what people don't really realize is that the entire chocolate factory was made from scratch. In fact, we started this from day one with an empty building right here in the Texas Hill Country. And I would like to know answers to questions. If I had known the answers to these questions when I started, we would have done things a lot differently. So when we went out to YouTube and we went out to look for content, we found that there's a whole bunch of ways to learn how to make a marshmallow or how to make a truffle and how to make ganache. But nobody's really telling you what you really need to know to open a chocolate business. So Melanie and I thought we're going to start this little live stream channel weekly where we're going to do being to business. We're going to talk to you about what it's like to run a small manufacturing business in Texas. And I think it'll be applicable around the country. And so we're going to get started and we're just going to go through a bunch of questions. So, Melanie, how'd I do?

SPEAKER_02: 1:23

Sounds good. First question.

SPEAKER_01: 1:26

Okay, so the very first question we have is why we chose Fredericksburg for our chocolate factory.

SPEAKER_02: 1:31

Well, that's a simple answer. That's because why wouldn't we choose Fredericksburg? We're in the middle of, you know, the second largest wine region in the United States. And what goes better with wine than chocolate? But you live not to mention I've lived here for 47 years. So it's convenient, you know, for both of us. You've had a house here for a long time. You moved here full-time a few years back. And why would we relocate when we live in a really, really great area?

SPEAKER_01: 1:57

I think she got a good point. So for many years, I ran um a business in Dallas and uh I had sort of a weekend home here in Fredericksburg. And I would come on the weekends. My kids grew up here. And then when I stepped down from Blue Cross and actually decided to live here full time, um, we decided that it was a good place to open a factory. But the business community is strong here too. We're we're unique. You want to talk, tell the people a little bit about what's unique about our area.

SPEAKER_02: 2:25

Just about our area in general. The fact that we have, I don't know, 80 plus wineries, distilleries, breweries, a lot of tourism. People expect a different experience when they come to Fredericksburg. They don't, they're not necessarily, you know, looking for the attend an opera and go to a play kind of thing. They want to be out in nature, they want to see what's different, and they want a little bit of Texas hospitality along with that.

SPEAKER_01: 2:54

So we really also wanted to go down the path of creating a very unique wine and chocolate experience. And uh I think that was sort of the genesis of why this started. We're in the middle of, I think is the second largest wine region in the United States here in Fredericksburg. Um we've got some great chocolate people here, but there wasn't a lot of focus on chocolate and wine pairing. So I think part of what we wanted to work on was could we build sort of the epicenter of chocolate and wine pairing here?

SPEAKER_02: 3:21

Well, and I think we did that and we pulled back the curtain on it at the same time. So, like you said, there's there are chocolatiers here, which is highly unusual, by the way, to have multiple chocolatiers in one little tiny area. But we have that. What we did differently though was we pulled back the curtain. We have these giant windows where you can see the factory. We're very technologically advanced as far as chocolatiers go in the southern United States. Um, we don't have a big labor force here, so we knew right away it was gonna have to be automated. We were gonna have to have, you know, max output with minimum labor put into it, physical labor from people, because they just aren't available. And I think we did a good job of that. I mean, you can literally see every almost square foot of our entire working factory from our retail store or from our tasting room upstairs.

SPEAKER_01: 4:11

And we also were looked at, I mean, talking about our fellow chocolateers, we've got great people in town. So Alicia Duke, who runs quintessential chocolate in town, uh, she's is the world's expert on creating liquor-filled chocolates. And nobody in the world is a better. She's one of the few people in the world that still can master that technique, and she's amazing. And then we also had El Ray, which I used her chocolate room a long time, but Venezuelan, uh single origin source, beautiful chocolate, but they typically do barks and things of that kind of nature. And we really wanted to create, and I know Millie doesn't like this word, so she's gonna roll her eyes, but artisan chocolate factory. There it is, artisan chocolate factory around wine and chocolate. But it just made sense to us. We lived here, um, there was a need, uh, and we had a particular interest in wine and chocolate. And so that's really the reason that we chose Fredericksburg.

SPEAKER_02: 4:59

Absolutely.

SPEAKER_01: 5:00

Okay, second question. The real cost of starting a manufacturer, a manufacturing business from scratch.

SPEAKER_02: 5:07

Millions and millions and millions of dollars. No, I don't know. I don't have to write those checks, thank God.

SPEAKER_01: 5:14

That's your job. Yeah, so uh it was, I will be honest with you, it was a big bite. Uh, I don't think I really understood exactly um what we were building. Uh I had always built service businesses uh with not a lot of physical infrastructure. Um, here we had to have a building, we had to have equipment, we had to have power, utility inference inference. We just had uh the guy in the store recently who was responsible for us existing, which he figured out how to deliver three-phase power to power European chocolate machines here in Fredericksburg in our location without tearing up our parking lot and charging us$200,000 to do it. So, yes, I grossly underestimated the complexity of starting the manufacturing business. I think one of the things that we had going for us was I had made chocolate a long time. I had met a lot of um, I would say great friends over the years that helped us out.

SPEAKER_02: 6:13

Yeah. Everything from other chocolate peers to uh, you know, manufacturing contacts and things like that that helped us make decisions right off the bat on what we needed, what we needed to invest in and what we didn't. And thankfully you had made enough chocolate that you knew all of the working parts and what we had to have in order to execute that. We just yeah, probably didn't anticipate how much that was gonna translate to dollar-wise.

SPEAKER_01: 6:40

And I just don't think people understand how much support you really need from the industry. Now, I tell the story a lot, so I'm not gonna repeat the story here, but this industry is very friendly. I mean, I there are people that will help us out whenever we need it, and vice versa, we tend to help people out. But Paul at Chef Rubber. So, Paul, there's Chef Rubber. We're just a little bit of background. We're in the same community that the headquarters and warehouse of Chef Rubber is located. Now, just for those non-confectionary folks, Chef Rubber is one of the largest producers of colored cocoa butter in the world, and uh that means that we're very close to a giant warehouse of confectioner ingredients. So we have incredible access to ingredients, which is that number one made it really easy to build, but we also have incredible access to Paul.

SPEAKER_02: 7:27

Yeah, I was gonna say knowledge. Knowledge advice.

SPEAKER_01: 7:31

Before we opened, I went out to Paul at the warehouse and I and he's a friend. And I sat down and I said, So give me, tell me the rules I need to do. And I remember I wrote them down in my phone, and we did every single one of them, every single thing he told us to do.

SPEAKER_02: 7:48

He did not steer you wrong in any way.

SPEAKER_01: 7:50

Even on little stuff, we we bought. I remember the weirdest thing he had us do was buy um an automated, almost drivable floor cleaner, floor scrubber, floor scrubber for our factory, which we couldn't afford at the time, but we did anyway, and it's turned out to be fantastic. So Paul and I would say the real cost was cut because we had a lot of help from friends.

SPEAKER_02: 8:14

I would agree. I would agree a lot on that.

SPEAKER_01: 8:18

The other one I would say is that we've had some great people help us. Vincent Pallon, uh, talk about John Philippe MRA. Yep. So we had some great people. Um John Philippe was the guy who founded the the Bellaggio chocolate shop, and Vincent is the one of the best chocolate artists in the world. He's at the cosmopolitan, and these people are both French. Uh John Philippe's actually um MOF. He's uh one of the few chocolaters in the United States that's MOF. And these folks tasted our product early on. So when I talk about the cost of manufacturing business, you're gonna have to have your recipes. There's a lot of cost of recipe development. And um, we had a lot of help in putting that together too.

SPEAKER_02: 8:59

We did. And we had to really think about who our clientele was because it's great to impress a chef. It's great to impress, you know, this fabulous French sculpture artist. But is he the one who's gonna buy your product and sustain your business? No, he's not. You know, yes, he he will when he's around, but we kind of had to go down the middle and not stay a hundred percent Dan artisan, and we had to do some regular confections. And by regular, it that doesn't mean easy by any means. So we do things like caramels and brittles and toffees, which are again not necessarily easy to make. I don't know who's tried to make that with their grandma in a kitchen with a bad thermometer, but it's it it's expensive to do. It requires equipment, it requires space, and it requires a ton of knowledge to do that.

SPEAKER_01: 9:47

Well, I think to do it at scale, right? Absolutely the challenge you have in operating manufacturing businesses being able to do it at scale. And consistency.

SPEAKER_02: 9:55

And consistently, it's gotta be the same every time they rip open a bag.

SPEAKER_01: 9:58

And although we were making beautiful, shiny bonbons, right? That meant that the toffee that we created had to knock it out of the park. The caramels had to be perfect out of the park.

SPEAKER_02: 10:09

So we have to be able to sit on a shelf next to one another and hold hands.

SPEAKER_01: 10:14

Exactly right, which is not easy to not easy to do. Okay, so next question. Mistakes we made in year one and what they cost us.

SPEAKER_02: 10:23

We made, or just you made, I made all of us together. What do you think? I'll let you go first.

SPEAKER_00: 10:28

I have a bunch of them.

SPEAKER_02: 10:29

But mistakes we made. Well, I was just kind of talking to Dan about this a few minutes ago about how he has a different perspective of this business and the way we started it and what was required of it than what I do, because he was on one side of the wall handling the financial aspect of it and talking to the three-phase power guy and doing all those things. And my role is more just, you know, clients, customer interaction, the retail store, things like that, the look and feel of the store, the products, how they line up, and do they go well together? Who's gonna buy this? Who am I catering to? And what do they want? Because we can make all the beautiful artisan bonbons we want to. And if that's not a flavor that people want to eat, we're just making it to be making it for an Instagram page. Like they we have to be able to sell it and we have to know what flavors they're looking for and what their expectations are. And I think mistakes that we made were we kind of assumed that everyone was gonna want. I think we tried to make something for literally everyone. And so we made, I don't know, 40 products right off the bat. I mean, we had everything from buttercreams to barks that had dried fruit in them to roasted nuts, to chocolate-covered nuts, to the artisan bonbons. Like we just threw it all out on the table to see kind of what was going on. And I don't think we necessarily needed to do that. We probably could have saved money on packaging for one, because that's the expensive part of doing chocolate, really, um, and ingredients on things because we we tried to wow them with this huge portfolio of products when I don't think that's really what we needed to do. We could have eased in a different product, you know, over time instead of trying to just do everything all at once, which created the nightmare again of packaging, which Dan doesn't have to really think too hard about the packaging. He just gets to fly in and say, Oh, I love that, or no, that's horrible. I hate that. I don't want to do that, get rid of that. And then he has to pay for it. So yeah, and I don't know.

SPEAKER_01: 12:39

What do you think? No, I think you're right, actually. I I would say that we had a great business plan when we went in. We had the plan with the plan was solid.

SPEAKER_02: 12:50

Yeah.

SPEAKER_01: 12:50

I think what we didn't have early on, which I would say you have to have this early on if we were doing this again, is we didn't have discipline around certain elements in the plan. And uh particularly, let me give you some examples. Is that uh Melanie kind of hit on it? Like we we knew our market, we talked about Fredericksburg, we talked about the Hill Country, and we live here, and we live here, and we had an idea what our ideal custom customer profile is, but we weren't that disciplined around it. Right. And um, and I and I'll and I'm again we're we're showing you everything here. We're gonna pull back the the covers and we're gonna show you the pros and the cons. So, one of the examples that I would say up front is that um, you know, I like to tell people that our ideal customer profile is William Sonoma. It's approachable elegance. People go into the mall, you know, mean trouble walking into William Sonoma, but we're often not your daily driver. And the second thing is that we weren't opening a chocolate shop. We have a chocolate shop, by the way, but we were opening a chocolate factory, which means that we have a different approach to actually manufacturing goods, meaning that we have a lot of production capacity, so we can we can produce a lot of products. And that is but to Melanie's point, it was both a good and bad, since we can produce a lot of products. We did produce a lot of products, and so I think part of the discipline around it was was an understanding kind of what that ideal customer profile is, what they actually want, how the products work together, how the price point works, and all that. The second biggest lesson oh, there were two lessons that I would take out of the first year. The first one was um people cannot buy your product if they don't know you exist.

SPEAKER_02: 14:29

Right.

SPEAKER_01: 14:30

So we have built a factory. We're not in the prime location on Highway 290 with 50,000 cars every three hours. Uh we're one block off 290, so we're really close, but we don't have store frontage. And um so we really had to not visible store front. Not visible storefront, and we had to quickly jump into um marketing. And just I don't know if you know, again, we're gonna come clean here. We we realized early on that this was gonna make our break our business. So we actually built a marketing company to support the chocolate company because we needed to have the marketing business. I can remember um I was sitting in the tasting room one day about something, and I was talking about how much things cost on this nickel and dye basis. And I remember Mellie walking in and she said, quit bitching about it and go build a company that will do it. And so we did. We built a company to do our marketing because we needed to tell our story.

SPEAKER_02: 15:25

And we needed access to tools that all of the big boys have that not every small business can afford, that most small businesses can't afford.

SPEAKER_01: 15:33

So I think we had to build it from scratch.

SPEAKER_02: 15:35

Yeah, you did a really good thing creating that. I think I think it was uh the best move we could have done. Now, not everyone can do that, you know. So if you're opening up a chocolate shop, don't think, well, I've got to get this whole marketing company to go hand in hand with it to open up a chocolate shop. That's probably not true, but for us it was.

SPEAKER_01: 15:52

Well, if you're opening a fact, you better have marketing resources. Yeah. And then this was minor, but I just remember because it was such a big deal, um, was the fact that we didn't have what I would call good processes in place for managing like communication. So I remember when we launched our e-commerce store, I just remember all of a sudden we started getting questions, and you know, they were all positive generally, but they were questions for people. But they came in on Facebook, Instagram, um, you know, I think YouTube, they were coming in on email, yeah.

SPEAKER_02: 16:28

I think we just underestimated how many people were going to contact us or ask a question. Like we thought, oh, we're gonna put it out there and we're telling you what the products are, and you're just gonna know, and you're not gonna have any question. And sure enough, they had questions in every outlet coming at us from every direction.

SPEAKER_01: 16:45

And then Melanie would respond to a question, and then I would respond to the same question, and the person would get two different answers.

SPEAKER_02: 16:52

Vastly different answers because Dan has a philosophy of seven-star service.

SPEAKER_04: 16:57

Yes.

SPEAKER_02: 16:57

I'm thinking if I can, if I can deliver five star, that's great. He's now got me aiming for seven star. Sometimes there's an F-bomb in front of it before it happens. But yeah, we were we were responding to things, but they may have been wildly different responses depending on what the question was, just because you know, he has one aspect and I have the other of dealing with customers.

SPEAKER_01: 17:21

So we set up a system. I mean, I remember we did it in 48 hours. We built a customer management system that linked to Shopify, which is our e-commerce store, so we could track both FedEx and UPS, and we could track the order, and it changed everything.

SPEAKER_02: 17:34

For me, that was life changing running e-commerce and you know, people customers coming in the door and communications. I don't I have no idea how we would function without it today.

SPEAKER_01: 17:46

Okay. Next question. And this one is really applicable to you. Okay. Okay. When to quit your day job versus side hustle your business. So tell us about quitting your day job.

SPEAKER_02: 17:59

So, my so little history on Melanie, I've been in food service for 32 years now, full service restaurant, corporate, mom and pop, you name it. Um, 10 years ago, I decided to open up my own business and I did a bakery and a coffee shop because in my food service history dealing with customers, the happiest ones were the ones having dessert or coffee. They weren't, you know, starving because they're waiting for their meal and they've got screaming kids. They were happy. So I thought, let's let's do that. And there was a need for it at the time in Fredericksburg. There wasn't a lot of great communal places to go and sit and hang out and work and have great coffee and a pastry or something. And so I created that. It was my baby, loved it, enjoyed every single second of it. It was, I underestimated the physical toll it was going to take on my body to produce, you know, anywhere between 19 to 32 products fresh every single day in a bakery, um, required me to be at work by 4 a.m. every day, six days a week. Um so when Dan approached me and brought me on to this concept of doing a chocolate shop, I thought it was great. I had done chocolate with him before in his kitchen at home and it was fun and it's very creative. And I loved the idea of it. And as it started to grow and I saw the potential and where this business could go, I got really excited about it again. And it's not physically demanding. It's the uh dermatology of the culinary world. I don't have to get up at 4 a.m. I don't have to be here till midnight. I I can leave and go home and go to sleep and not worry about did I turn an oven off? You know, the tempering machine, if it was left on, well, it's gonna be on when you get there the next day. It's not a big deal. So for me, it was just a matter of deciding hey, I I think if I can consolidate and get rid of the bakery in the coffee shop and focus fully on chocolate, I can help grow the business. Lot faster. And I think that was a wise decision. And it happened. If you're talking about, you know, quitting your day job to just follow your dream. I I yeah, prepare to be broke if you do that. There's no hamburger in the helper anymore.

SPEAKER_01: 20:17

Like no, and I think uh I do think you if you do you could start this business without a job. Um, but it it helped probably, and of course, I have another job too, right? And I and I haven't quit my other job, right? So I still have a day job and I still do chocolate too. Um Melanie, though, works full-time for us now, which has been fantastic. It's changed my life to have her there full time, and she you know helps me run the daily operations of the chocolate factory and allow me to be more uh strategic, whatever that word is, but uh to be a little bit more strategic.

SPEAKER_02: 20:51

Yeah, strategic and as of late, just you know, stepping back. I'm stepping back. Yeah, I use that term a lot. So if you perfect us anything around Dan in his personal life or his work life, if you if you execute it and you do a really good job of it, suddenly you're in charge of that.

SPEAKER_01: 21:07

It's just uh well to be fair, we have assembled a fantastic team of people. Absolutely. They're like world class. I mean, we've got world class people working for us. And so for me, I know that when I don't need to be there, I don't need to be, you know, stepping in and getting involved in one of our sous chefs like job. I can tell he knows exactly what he's doing.

SPEAKER_02: 21:29

I don't need to spray because he tells you.

SPEAKER_01: 21:31

He tells me that he knows what he's doing. But even though I like to taste and I in there and I do a lot of recipe development, and I still spray chocolate moles and do all that kind of stuff too. I still work for Melanie, but Melanie's officially my boss now. That's the way that it works. And that brings the next question. Let's answer this question here like um building a business with your spouse, honest pros and cons.

SPEAKER_02: 21:55

So to clarify, everyone thinks Dan and I are married. We're not married. I'm his work wife, he's my work husband. That just means I spend the money and he pays the bills and I tell him what to do, and 99% of the time he just doesn't. And we fought a lot. We do, we fought a lot, actually. We're great friends and we know each other so well. I would call us family. I mean, I my kids think of you as family, your kids think of me as family. I think um if we were actually married, it wouldn't be for long. We would be divorced if we were running a business together. I've never run a business with a spouse before, and I've had them, and so have you, but we've never actually done that. I think it would be hard.

SPEAKER_01: 22:35

Um just so you know, just the community that's out there online, uh, you're very kind, Melanie, uh, and often not so kind to me. Uh, because many times obviously I walk around in my white, you know, pristine uh Thomas Keller looking outfit, right? We know that's pressed, and I do the TikTok or whatever, and I'm always filming Melanie working. And almost every single week I get a text message or a direct message from somebody going, I, you know, you should help her out. You know, she's your wife, you should help her out. And that's pretty, you know, I do get a little bit of feedback, but I think it'd be really hard to run a business uh with your spouse. Okay.

SPEAKER_02: 23:12

Absolutely.

SPEAKER_01: 23:13

Okay, next question. Um, how did we decide what equipment to buy versus lease? That's easy one.

SPEAKER_02: 23:20

That is really easy. I mean, we don't we only lease one thing, don't we?

SPEAKER_01: 23:25

What's that?

SPEAKER_02: 23:26

The dishwasher.

SPEAKER_01: 23:27

Oh, that's true.

SPEAKER_02: 23:28

We have a glass dishwasher upstairs in our tasting room that we decided to lease. And I don't really even know why. I mean, I guess just because they're expensive and we weren't sure how much we were going to use it, if it was really worth investing in, and then they maintain it for you. Other than that, I mean, I don't know where you go to lease any piece of equipment that's in our factory. It's it's a purchase-only kind of plan.

SPEAKER_01: 23:52

Well, I think Melanie kind of hit the nail on the head a little bit. Um, if you're running a shop or kitchen, um, you probably could lease equipment.

SPEAKER_04: 23:59

Okay.

SPEAKER_01: 24:00

When you're running a manufacturing business, though, where you're actually having to have precision equipment that has to be dialed in and it's often hardwired to the wall. And I mean, there's all kinds of you know, three-phase power that if you unplug it or uncook it back up again, or a different machine that's gonna run backwards and stupid stuff like that. You really can't do that in a manufacturing.

SPEAKER_02: 24:22

Well, we even have a piece of equipment that was literally built into the building. Right. I don't even know if we can take it out. Actually, there's two of them.

SPEAKER_00: 24:30

Right.

SPEAKER_02: 24:30

So I mean, well, you're not gonna lease something and put it in your space that they can never take it.

SPEAKER_01: 24:36

Well, it would be very expensive to change it out.

SPEAKER_02: 24:39

Absolutely, yeah.

SPEAKER_01: 24:40

Yeah. And she's referring to air. We have it, probably one of the most expensive in um equipment pieces that we have is always shocking. Nobody ever sees it, but it's uh we have an air compressor. Yeah, and because we use a lot of air, that's one of our big ingredients in chocolate, is we use air to spray our molds and to run our machines, and all the processing machines have pistons and things that run with air all the time. Air is a big, big, big deal for us. And the FDA requires you to have food grade air, and the food grade air is huge, it requires multiple filters, all kinds of different safety mechanisms. We can't have to have a special air compressor for that, it's extraordinarily expensive, and we actually built an entire room for it that's almost specialized just for that.

SPEAKER_02: 25:23

This was not like a Black Friday purchase from a home improvement store air compressor. This was a serious, serious investment.

SPEAKER_01: 25:31

And this is probably uh here's the next question is the unsexy parts of entrepreneurship that nobody talks about.

SPEAKER_02: 25:39

Whoa, there's a lot.

SPEAKER_01: 25:41

So you've been an entrepreneur a lot, probably your whole life.

SPEAKER_02: 25:43

Yeah, there's very few parts of being an entrepreneur that are sexy. I mean, I think most of them are not. Once I mean, you look at an Instagram feed and you see the one sexy part, you know, the the finished product, the the the money shot. Other than that, no, none of it is sexy having to you know, again, if you're starting a business yourself, you're not taking a paycheck right away. That's not very sexy. Like you better hope that you still have a great wardrobe and plenty of expensive makeup to last you for a while because you're not gonna get paid um your car. You know, get a new shiny, pretty car right away. You gotta wait. You gotta, you gotta just milk everything that you've got because none of it's sexy. You're you're giving up your time, your family, your everything.

SPEAKER_01: 26:31

Yeah, and I think I'm gonna blow a myth here for some people too. And I think this is true in general about social media. Like social media creates a view of things that are very romantic and they're you know, they're yeah, but you know, they look like completely amazing, whether it's marriage or manufacturing. I don't think it really matters. It all looks like beautiful, it looks like you know, heaven and rainbows and butterflies, right? Um, but you know, a lot of times in chocolate, I see this on on Instagram all the time. You know, there'll be pictures of things that are, you know, used to be there were pictures of things that were just people would just like go boom, and they had this like completed chandelier. Yeah, yeah. And this required polishing moles, it required airbrushing, it required tempering every one of those. And by the way, they're not gonna turn out the first time.

SPEAKER_03: 27:18

Yeah.

SPEAKER_01: 27:19

And so people get frustrated. And so I get a lot of messages on Instagram saying, you know, hey, I can't get my cocoa butter to work or whatever. How you know, how do I get this to work? And I go, you need to do it 10,000 times. It's not like a but on Instagram, you're gonna see these people that like they've done a recipe for the first time and it just turned out perfect. And honestly, it's not it's not that way. Yeah, you're you're not gonna have stuff turn around. And then by the way, it doesn't happen for us either. Like, I mean, when we first started making caramels, I had made caramels for 30 years, and I knew how to make a caramel. I didn't know how to make 200 pounds of them at a time, and to make them pretty and to melt them.

SPEAKER_02: 27:56

Well, and we were in robium too. So, yeah, you can make a caramel, but how do you make 200 pounds of it that you can cut and it get it from you know beginning to end? That quantity takes a lot longer than a little pot on the stove.

SPEAKER_01: 28:09

But we had to have products that would sit on the shelf, like a caramel would have to sit on the shelf next to an artisan bonbon, right? That was hand painted and all this stuff, right? Um, which meant they had to look like they came out of the same factory.

unknown: 28:23

Yeah.

SPEAKER_01: 28:23

Well, I'm gonna let you in a little secret. When we first started making caramels, we made hundreds of pounds of caramels. We ate a lot of caramel. We ate a lot of caramels. We made so many caramels the very first year that we melted them down for uh Halloween and we handed out caramel apples for free. For free to get rid of the caramel kid in Gillespie County that came by the chocolate factory. Yeah, I mean that's what we did because we made caramels and they weren't they weren't perfect. Not that perfection is where you exactly need to be, but they they were fat. I mean, look at me. They had like rounded edges. That's what I tell people because we weren't we were cutting them wrong, they weren't molded the right way. And honestly, it was it was that whole story we've told today. It was Paul working with us. We reached out to people on the West Coast, we we perfected our recipe, we realized we couldn't use Celsius anymore, we needed to use Fahrenheit, we got really disciplined around our recipe, we came up with a new process, and it worked.

SPEAKER_02: 29:19

But again, that's the beauty of our industry. You know, the the whole chocolate and confectionery industry is so friendly and so kind that since there is no, you know, dedicated school for that, if you're a professional and you have really just nailed a recipe, you help everybody else. You know, somebody calls you and asks you for advice, you just help them. That's just what you do.

SPEAKER_01: 29:41

No, and I guess my point is that if you saw a picture of our caramels online early on, you might think, oh wow, they just spit out a caramel. No, it did not work. It's not sexy. You're gonna, you're gonna make a lot of mistakes, and it's just not not going to be that easy.

SPEAKER_04: 29:56

Nope.

SPEAKER_01: 29:56

Um okay, here we go. Here's a good question for you. Setting prices when you're a premium brand in a commodity market.

SPEAKER_02: 30:06

So yeah, you're gonna hear that. You're gonna hear, and and I think the culture now is kind of coming back around for home-based bakers or for kit cookie decorators or even people in the confectionery world, because a lot of chocolatiers are just mom and pop. They're doing it out of you know, their office or their garage or whatever. Um, there's finally a movement now where people are encouraging you to price your products for what it actually costs to create that, but still consistently you're gonna get customers coming in and going, why is it so expensive? Why is your chocolate so expensive when I can go, you know, to the drugstore on an end cap and I can get three for$5 and yours is$10 for one? Well, there's a whole lot of factors that go into that. I mean, for the most part, I mean it can be anything from the quality of packaging, the fact that it is an artisan bonbon and it's a specific size, and you have one size mold for that. So the cavity of tray that you have for the packaging all has to match and you have to source that. Sometimes you can get it in the US, sometimes you can't. Um those are all factors that play into that, and that's not even ingredients. So then there's the ingredient cost of, you know, we're not complete mom and shop just building out of a garage. We can purchase a little bit more, larger quantities of ingredients, but we're still not able to buy, you know, mass amounts so that we can get that huge price break and pass that along to the customer. There's just a lot. And then our real estate, our footprint. I mean, we're not, we're a tiny manufacturing facility. We're located in Fredericksburg, Texas. We're like the aspen of Texas. It is expensive here, but it's expensive for a reason. We have clientele, we have people right at our door, hopefully buying product. It just there's a ton of reasons why.

SPEAKER_01: 31:55

And and well, and this community has not built a lot of manufacturing businesses in the last 20 or 25 years. In fact, most of the community is actually not even zoned for this type of manufacturing. We're in like one of six acres in town that that Billy's zoned. The other thing too is that we use um ingredients that are just not made in the United States. So the and we made decisions early on that we were going to use very high quality ingredients where it mattered. And a good example is chocolate. So you know, we um we are try to be a hundred percent Felklin shop. Felklin we think is one of the best chocolates in Switzerland, and that's what we use here. They're fantastic. Sourcing it is a challenge, but in the last three years, you know, we've seen chocolate prices go up 400%. You know, now this is a story that is not just it's not unique to our business. And that's I think that's one of the reasons we're doing this being a business show, is that it's not unique to the chocolate business. Uh, I'll give you a really good example. In Fredericksburg, we are blessed to have great barbecue. And there's a barbecue place in town, Acre Barbecue, E-A-K-E-R, Lance and Boo Acre. They grew up, good friends, whatever. Lance came in and he said, you know, wow, Dan, chocolate prices have really gone up. And I remember looking across to him and I said, I know they're the same price per pound as brisket, right? Because it's true. Because it's the same price. I mean, meat prices have gone up. We also pay a tariff on many of our ingredient products because they're imported. And so it's created some challenges on pricing. We've been um, we've really attempted not to raise our prices. Um, the only way we can do that is because we're such a small team, again, and we're willing to help us not raise our prices as uh has been the fact that we've gotten more efficient. So we we aimed at that, we saw what was coming on chocolate prices, and so we did all the stuff we could do. We bought as much chocolate in advance as we could buy, thinking that we would buy enough. We did it, we got busier the second year when all this went down and we didn't, we didn't have we just didn't work, we didn't have enough, we ran out. That was part of that. Secondly, though, we got more efficient, and a good example would be like making bonbons. And I mentioned this on Instagram. Yeah, you know, when you first start making things, things don't turn out perfect. And so you have in the industry, what's it called? When you when we have product that doesn't make the final cut, uh what do you call it? Reuse or something. You've got to Oh, you can remelt remelt, right? We don't do that here, by the way, but in the industry, um, there's remelt where you can take some product and you can reuse it again.

SPEAKER_02: 34:34

Well, because we're just working with sugar, so you're thinking, oh, we're gonna melt it back down and start over. Or top you lose quality when you do that.

SPEAKER_01: 34:41

And there's nothing wrong with doing that. So people that are doing that, I'm not speaking bad about you. I'm just saying, we just don't really do it here. But um, but that remelt cost you money because that's product that you can't sell. So if you're not reusing it, then you're just throwing away cash. And so one of the ways to get your cost down was we got better at doing things. We got we got our you know, our our number of bon bonds out of 3,000 that we would do. We've had times where 100% of them turn out, right? So we don't end up wasting anything, right? Because the waste actually ended up adding to the cost. So uh anyway, I thought that was uh that's a was a great question. So I like that. Um see what the next one is. Okay, we'll tackle this one. The 8020 of small business bookkeeping. I'll tackle that one.

SPEAKER_02: 35:34

Go for it.

SPEAKER_01: 35:35

Um start early, start good with the right person. Um, we struggled a lot when we first started finding the right talent. We now have a world-class bookkeeper that works for us. He is fantastic. Um and uh he's done an amazing job. But I would say early on, make that as a priority for a lot of reasons. You know, one, the biggest one is just knowing whether or not you're making money or not. Because if uh if you don't have the bookkeeping and systems in place, it makes it really hard to track. And particularly again, if you're running a shop, I don't think it's as big of a deal. But if you're running a manufacturing business where you have cost of goods and cost of goods sold, and you're you need to track your ingredient pricing and knowing that you're, you know, particularly when you're starting out, knowing that you're not gonna sell a product at a loss. Right. Which again, I ask Melanie that question all the time. I'm like, okay, are we making are we making any money on this? Are we making any money on this? Because sometimes we were successful. And I'll be frank here. I walk in the factory sometimes, and Melanie's got a new product packaged, and it just looks amazing to me. And I look at what we're charging for, and I'm like, okay, it doesn't seem like we're charging enough for it. So I'm like, I mean, are we making money? And she assures that we are, right? Because again, the efficiency has gotten it's gotten better. Um let's keep going. This final list, we only have a few more here. Like, how we manage cash flow in a seasonal business.

SPEAKER_02: 36:55

Oh, geez. We don't.

SPEAKER_01: 36:59

It's hard.

SPEAKER_02: 37:00

We we dip into Dan, the bank of Dan. It is tough.

SPEAKER_01: 37:04

Uh, it's tough. If I had to look back on um kind of a personal uh view of this business in the at least in the chocolate business, and I think in the manufacturing business, it can vary depending on what you're doing. Every consumer product in the United States, whether they tell you that they are or not, they're seasonal. Uh I don't care if people are buying, you know, they're buying it there's always Black Friday, there's always going to be a big holiday sales. And I don't care if you're selling chocolate or you're selling razor blades. People are gonna groom up more over the holidays. They're gonna everything in the country is seasonal to some degree. Chocolate is particularly seasonal because people always buy chocolate between Halloween and Mother's Day, number one. Number two, it's hot in the summer, so shipping charges add to it. So at the very same time that your production and and sales go down, your revenue for the summer, your cost of shipping and selling goes up. It goes through the roof. It goes through the roof. And so one of the challenges is trying to figure out how to balance that. And we've done that here, and we're really going. Well, I guess we can tell people what we're doing this year, but we're going really big time in 26 to create products that actually allow us to do that seasonal thing better. One thing is uh we have always kept kind of coal closed uh in-house our way of tasting wine and chocolate together. So we've developed a really sophisticated way of pairing wine and chocolate. So when people taste a glass of wine and they taste a chocolate, they just go, wow, that works. Well, we've we've codified that. We know how to do it, we know how to create that, and we're gonna start teaching the world that. So we're gonna start bringing in people. We've already started, we've had at least one or two of these programs already where we brought in industry people to teach this class. We're gonna start talking to the consumers. I think that'll help. We also do experiences, so we teach we do a lot of tastings and classes in the summer, which help us out. And then third, we're launching a new line of brittle products, which we're gonna be basically kind of building on our brittle experience, like jalapeno brittle, that we're gonna do is more position as a wholesale product, just out of the fact of temperature sensitive and factory product.

SPEAKER_02: 39:26

Well, we had a one-two punch with that too, because not only do we have a seasonal company and product, we have we're in a seasonal location. So Fredericksburg itself is very seasonal, it's tourist driven. If the weather's bad, people aren't here. If it's too hot, people aren't here. If you know schools in session, less people are here. So we had we kind of had had to come up with a solution to that if we're going to survive, because our location and our product lends to seasonality.

SPEAKER_01: 39:54

That's right. I mean, we are the I think like the most southernmost chocolate factory in the US.

SPEAKER_02: 39:59

That either makes Us smart are really dumb, really dumb, particularly when it comes to 118 degrees outside, and Dan wants to do free shipping on chocolate. Yeah, we need a lot. We want to cut him.

SPEAKER_01: 40:09

Okay, last question, last question for this section, and then we'll do another one of these. Of course, we're gonna do these weekly. But the next one, exit strategies. And I get this question a lot, probably because of my history. But are we building to sell? Are we building forever? So, what's your answer to that?

SPEAKER_02: 40:26

We are building for the long-term sustainability of a fantastic business that we sell for a lot of money.

SPEAKER_01: 40:41

I think the answer to that question is both, right?

SPEAKER_02: 40:43

We're we're in the chocolate world. We didn't get to do this when we were 18.

SPEAKER_01: 40:46

Like you and I are both not spring chickens, right? I'm a lot older, by the way. I'm a lot older. Uh that much older. I'm a lot older. Um, but no, I mean, I think we're building this business uh for the long term. I mean, it is a business that we envision that will continue to grow. We've had uh we've been incredibly blessed by the community and blessed by our customers. I mean, um the business has really grown. I mean, I I think our I don't know what our growth, you know the numbers probably better than I do, but I mean we're probably seeing, you know, we I think we had this year during our Black Friday and through Christmas. I mean, I think our sales are we're up a hundred percent compared to last year, right? I mean, we've had tremendous growth, and because of that, we're excited to see where the business goes. I do think um we want to build a sustainable business long term, and I guess eventually, like Melanie said, you know, we're gonna age out at some point.

SPEAKER_02: 41:37

But yeah, that's at some point we are.

SPEAKER_01: 41:40

Well, thank you. You did good. We did good on our first live stream. What do you think? Leave us a comment below. And if you have any questions, obviously leave them in the comment section. We're gonna answer every single one. And if you have a question you want us to address in one of these episodes, then send an email and you can send it to info at hillcountry chocolate.com. Um, Melanie reads everyone, that's Melanie, and she reads every single one of them, and we will respond to you. Uh, we do help chocolatiers all around the world to give them advice. We host people in our factory to do trainings and classes, and so reach out to us and interact and let us know what you think about these live streams. And until next week, uh thanks for joining us.