This Bakery Chain's Incredible Story Began With a Brain Tumor and Nothing to Lose
A close call with death left Mr. Holmes Bakehouse CEO Aaron Caddel unafraid to take risks and question assumptions.
As a teenager, Aaron Caddel began having seizures. His doctor told him he’d grow out of it, but as he approached 20, they became more frequent. Then an MRI revealed a tumor growing on his brain, pushing against his primary motor cortex.
Doctors said they thought the tumor was cancerous because of its rapid growth, but they couldn’t be sure. They advised Caddel to wait until the seizures became unbearable before pursuing surgery, out of fear that the procedure would leave him paralyzed.
“As long as I was willing to bare seizures, and losing bite-sized pieces of my tongue, I could maintain a life without extreme physical disability,” Caddel tells Entrepreneur. “It was the choice between dying at 30 and scanning Craigslist for wheelchairs at 25.”
Caddel held off and endured more seizures. Meanwhile, he decided that entrepreneurship would be his most likely avenue for success with his limited time left on Earth.
He negotiated a profit-sharing agreement with the owner of a failing chocolate retailer, which he turned into a coffee shop. The coffee business clued him into an opportunity in the breakfast market: There were a lot of coffee shops, but not enough bakeries to help them fill their pastry cases. In November 2014, he opened Mr. Holmes Bakehouse, a now Instagram-famous bakery that draws long lines for its delicacies such as the cruffin (croissant-muffin hybrid), which comes in rotating flavors such as cherry matcha and Almond Joy.
But that wasn't until after he applied for five credit cards in one day and put himself $100,000 in debt.
“As a millennial, I think I already had the propensity to break all the rules,” Caddel says. “The death sentence just radicalized that mindset by removing the fear of repercussions.”
Caddel eventually got the surgery, and the 25-year-old is now tumor- and seizure-free. He still has his mobility and his bakery. Mr. Holmes Bakehouse (named after a cat called Sherlock Holmes) has three locations in California and two in South Korea, and the company launched a wholesale partnership with national brand Intelligentsia Coffee in Los Angeles in January.
Mr. Holmes Bakehouse is now pursuing series A financing and just received a private equity investment from Kitchen Fund, a venture capital firm that backs “restaurant brands that people love for more than just a menu.” Managing Partners Greg Golkin and Dan Rowe have helped scale brands such as Sweetgreen, Cava and Five Guys.
A post shared by Dan Rowe, CEO, Fransmart (@rowefransmart) on Feb 25, 2017 at 9:24am PST
Caddel says his goal is to fill what he views as a major void in the breakfast market by scaling his craft bakery alongside a craft coffee roaster. His self-described millennial set of values, outlined below, give him the perspective he thinks will make him successful in a world of one-off bakeries and coffee empires.
When Caddel had his second grand mal seizure, a doctor revoked his driver’s license. Then 19, Caddel lived in Riverside, Calif., worked in Redlands and went to school in San Bernardino. The 20-mile radius lacked public transit options, and Uber had not yet become omnipresent. Caddel was an engineering student, but he was studying Arabic and says he dreamed of joining the CIA. With a grim life expectancy and no way to get around, he dropped out and moved to San Francisco, where he could rely on trains and buses.
While working as a barista -- and living in a closet (literally, he says) for $400 a month -- Caddel says he grew impatient with healthy friends who dwelled on trivial problems. He was dying. He didn’t have time for small-talk.
“Life stopped being an experience and became a series of critical decisions that I’d make before I kicked the can,” Caddel says. “I wasn’t depressed. I was motivated.”
At 20, he wrote out the eight-page profit-sharing agreement for the failing chocolate shop. He says he “became ruthless,” and by 22, he’d turned it into two coffee shops. That’s when he discovered an opportunity to do something even bigger, and he started pitching angel investors on an idea for a scalable craft bakery that would position itself to acquire a craft coffee company -- or be acquired by one.
He came up $100,000 short, which is when he maxed out the five credit cards. This gave him the funds to finish his retail space for Mr. Holmes Bakehouse, which he’d leased before he had the money. Previously, he’d sold pastries wholesale to his coffee shops and a few others in the city, working out of a rented kitchen.
Mr. Holmes Bakehouse board member and advisor Rich Menendez, who is the founder of Workshop Cafe and former VP of operations for One Medical Group, sheds some additional light on Caddel’s approach to his career.
“He doesn’t have a death wish. He’s not like, ‘I’m a crazy guy, I wanna do stupid shit,’” Menendez says. “He’s trying to always do the right thing, and some of those decisions are going to have risk.”
Shortly after Mr. Holmes opened its doors, Caddel received the news that his recently removed tumor had not been cancerous.
“Though I’m far from it, I don’t think my mind will ever let go of the need for success,” Caddel says. “It almost seems superstitiously tied to my chances of living.”
Mr. Holmes didn’t start drawing crowds of Instagramming twentysomethings by being just another bakery. Caddel tapped into what his peers want: handmade, small-batched and authentic.
“We’re no longer satisfied as consumers with just forcing food into stomachs and tossing caffeine down our throats,” Caddel says of his generation. “We’re now experiencing emotional benefits from these experiences by knowing that there’s a craft behind our morning ritual or there’s a story behind how the product came to be.”
Millennials love craft coffee: Between 2008 and 2016, the proportion of 18- to 24-year-olds who reported having consumed a gourmet coffee beverage in the past day increased from 13 percent to 36 percent, while past-day consumption among 25- to 39-year-olds increased from 19 percent to 41 percent during that period, according to the National Coffee Association’s 2016 National Coffee Drinking Trends report. (The NCA defines “gourmet coffee beverages” as those that are brewed from premium whole beans or grounds, espresso-based beverages, iced/frozen blended coffee and cold brew coffee.)
This surge has caught the attention of investors. Beloved Bay Area-based chain Philz Coffee has raised $75 million in venture capital, while Blue Bottle Coffee has raised $120.66 million. Peet’s Coffee and Tea purchased Stumptown Coffee Roasters and bought a majority stake in Intelligentsia in fall 2015.
Caddel is betting on his generation’s penchant for gourmet fare. He says he aims to scale his bakery alongside a coffee roaster without shipping or freezing his pastries -- or breaking the bank. “Our admittedly simple insight is that by breaking apart each component of the operation we are able to radically reduce the capital required for expanding,” he says. “Our focus is on protecting exactly what makes our product popular: the quality and the necessity for human involvement in production.”
Ultimately, however, expanding is about more than just financial growth for Caddel. Menendez explains that, as an advisor to Caddel, he’s seen how he’s handled several tough decisions.
“It’s more like, doing something super dope is way more important, and the money will follow that,” Menendez says. “I think he wants to do a lot in life, so it’s like, let’s not waste any time. Let’s not just sit on something and ride it out, because riding it out isn’t that interesting.”
That said, Caddel isn’t hasty, either. The company declined one acquisition offer last year, he says, because “our vision for Mr. Holmes has only been carried slightly beyond its infancy.”
Caddel’s values are also reflected in how he runs his business. Namely, he says he believes in questioning assumptions and established methods. He doesn’t let tradition get in the way of an alternative that might yield better results.
For one, he notes that the kitchens of several restaurants are based upon a military structure, with the head chef being the general. That’s not how Mr. Holmes is set up. Caddel says that this extends the creative process to the entire Mr. Holmes team, although that doesn’t mean that decisions are based on democratic voting. They’re just not all bottlenecked to him.
“People disdain the notion of dictatorship, yet we all seem to gravitate towards narratives about the creative visionary. Most of us have, at some point, worked restlessly for companies built on these ideals that pander a single ego,” he says. “I think that this is the apparent paradox: When we glorify individuals, the result is groupthink. But here’s another paradox: When we emphasize the group, we strengthen concept of the individual.”
To that end, Caddel -- a college dropout with no formal culinary training -- doesn’t put much weight on credentials. He cares more about ideas.
“Because he doesn’t have a formal education, he actually does genuinely believe that the people involved in the craft aspect of it have an input to making the process better, cheaper, faster and higher quality,” Menendez says. “It’s about, ‘Listen to me, because I’m doing the job.’ I don’t think a lot of companies are like that.”
Caddel makes the connection between his awareness of his own mortality and his approach to his business. He says that having a brain tumor made him question his own assumptions about how he was going to live the rest of his life, and that made him unafraid to question basic assumptions about how to run a company or operate in his industry.
“I can still feel the edges of my life,” Caddel says, “but knowing that statistically I am more likely to die at 60 than at 30 has compelled me towards a vision that is grander than even that which the tumor-stricken 19-year-old could conceive of while sitting in a San Franciscan closet.”