Heart & Sold

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The True Tale of Shari’s Berries

By Ted Johnson

Once upon a time a young woman, in a small kitchen in a small house in a small part of a small world, started a business that grew into a national sensation: a chocolate-covered, strawberry-flavored countrywide phenomenon. Then something went rotten in the heart of the business, and the no longer quite-so-young woman was left with a terrible taste in her mouth. But this is a fairy tale, after all, so eventually she dusted herself off, wiped away her tears and started all over again.
    In the beginning, in 1991, all there is to Shari Fitzpatrick’s strawberry patch — ultimately the high-end gourmet gift retailer Shari’s Berries — is a microwave oven, some Tupperware bowls and a lot of moxie. Fitzpatrick’s nascent concept: to make something good and fun to eat, something that always cheers up moms, girlfriends, fiancées and business partners.
    The founder’s industriousness and knack for marketing earn her a spot on the speed-dial lists of local business writers, which only helps the business grow and grow.
    And then, not-so-all-of-a-sudden, she has three stores in the greater Sacramento area to go along with 16 delivery vans and more than 20 full-time, year-round employees. That number mushrooms to a staff of 150 for The Big Day, a true V-Day. This is when the strawberries must be the best and the chocolate the tastiest.         Everything must be boxed and shipped to create a “presentation experience” that says “I Love You” in a unique way: chocolate-dipped strawberries made to resemble a bouquet of flowers.
    This is the tale of how Shari Fitzpatrick, now 42, still married to her high school sweetheart, Clay, and mother to three sons, found the energy to build a successful business and then lost her way.
    Fitzpatrick, today the owner of four stores in the region bearing her name, confusingly enough now has nothing to do with the online Shari’s Berries, the web-based operation that a few years ago she hoped would make her very, very rich.
    To be fair, more than a few people thought taking Shari’s online was going to make them rich, including an energetic graduate from McGeorge Law School, who quit his job at a local law firm to take Fitzpatrick and those delectable berries to unimaginable heights.

A Regular Cinderella

It is 1998, a time when anything to do with the internet seems rife with possibility. It is also when Shari Fitzpatrick realizes that, pregnant with her third child, she probably should not be putting in 36-hour stretches to fill all the Valentine’s Day orders.
    A country girl with uptown flavor who wears jeans and cowboy boots while driving her convertible Jaguar XK8, she jokes about her “hillbilly” upbringing before relating the dynamics of starting a new business.
    “I always have customers coming in saying, ‘You need to franchise,’ or ‘My sister wants to open a store like this. Will you sell her one?’ And I am so exhausted, and there’s so much business going on, and this young attorney comes in and says, ‘If you ever want to work on something …’ and hands me his card,” says Fitzpatrick as she reminisces in her office near Arco Arena.
    FedEx backs up empty shipping trailers outside her store and sends over employees to scan all the packaged boxes of strawberries. She has to contract with multiple local temp agencies to find enough help to meet the crush of the Valentine’s Day demand. There are people working around the clock and much work to be done at Valentine’s and Mother’s days.
    Luckily, Shari Cone of Klamath Falls, Ore., always has had a knack for embracing change. At 20, she follows her stepbrother to Los Angeles and becomes a mortgage broker by age 25. But she tires of that and heads to Reno, where she considers working in a casino but declines because the uniform skirt is too short. She ends up in a new company aimed at selling securities, studying 18 hours a day for three weeks to pass her Series 6 and Series 7 exams. Not bad for someone whose only post-high school education consists of one semester at Lane Community College in Eugene, Ore.
    After the securities deal falls through, she moves to Sacramento, where Clay Fitzpatrick is building pools. In a couple of months, she and Clay move in together and Shari’s Beary’s (as it was then spelled, a name given by her mother) begins. “I get three orders, and I’m so cool with that because that means 100 bucks,” she says. Fast forward eight years and Fitzpatrick needs help.

Enter Prince Charming
She digs out the card dropped off by that 29-year-old attorney, Christopher Ewing. In a matter of months, they are business partners. Fitzpatrick is the first to admit she would do things differently now. Perhaps the most crucial decision to revisit is the one she calls the “51 percent rule.” With no second attorney to help her look over the business arrangement, Fitzpatrick naively gives majority control of the business to Ewing, allowing him 100 percent of the decision making.
    “I didn’t mind sharing the business,” she recalls. “I wanted to concentrate on the fun things.” Lauded at that time as Sacramento’s Business Woman of the Year, she nonetheless signs a document that allows her partner, if he so deems, to fire her the next day — and she’d have no recourse.
    Initially the partnership works. It is the middle of the dotcom boom and Shari’s Berries fits the criteria of a possible internet winner: Its products have wide appeal and can be easily shipped. However, there are obstacles.
    “You had to have the right kind of strawberries. They had to be large and firm,” remembers Ewing, who is no longer involved in the food business and now heads insurance brokerage firm Keenan Holdings Inc. in Rancho Cordova. “And the strawberries couldn’t move during shipping. Something had to hold them in place without disturbing the chocolate. Finally, they had to be fresh, which meant the packaging had to keep them cool. You ship something across country and then it sits on the doorstep all day, the chocolate can’t melt.”

The Fairytale Fractures
Private capital is raised. George and Nancy Wong of the Bel Air supermarket chain serve as key investors and board members. The first cash infusion, Fitzpatrick says, was less than $500,000. The corporation is initially formed to include the stores and the  website. But, according to Fitzpatrick, the investors only want their money to go to the internet operation, which offers a bigger upside. “They didn’t want their money diluted by the stores,” she says. The corporation is reconfigured.
    So, Fitzpatrick keeps the Shari’s Berries stores and the internet business becomes Shari’s Berries Inc. at www.berries.com, a domain name costing $3,000 to acquire. At the time, Fitzpatrick considers the price much too high, but in retrospect Ewing points out, “it was really pretty cheap.”
    The investment community jokes that the shortest time period on record is the moment between investors giving their money and then asking for ROI (return on investment). There’s pressure to produce, but there never seems to be enough cash. Fitzpatrick admits she wants to focus on the product and let the money issues settle themselves.
    “I like to concentrate on the top line, the revenue; other people see the bottom line,” Fitzpatrick says. “I didn’t understand that very well.”
    Ewing recalls those days as long shifts aimed at getting the business up to speed — a phone system that doesn’t give customers a busy signal and a website that reflects the character of the founder. Money that came from the growing sales is poured back into the business.
    “We’re expanding at an extremely fast rate,” Ewing says. He strikes a deal with 1-800-FLOWERS.com, but it often takes 30 or more days to get paid for an order. They need an engineer to solve packaging problems. Someone from Dell counsels them how to set up production lines. Supplies have to be purchased, people trained.
    The ingenious solutions include a foam packaging material that can stretch around the heads of the berries and an insulated lightweight cool pack that keeps them at a good temperature. “This shows Shari’s marketing ability,” Ewing recalls admiringly. “The cool pack was reusable, and Shari had put her Shari’s Berries logo on it, so whenever people used it again, they were reminded of the company. It was great marketing.”
Just as the company hits more than $1 million in annual sales, funding for internet companies disappears. By spring 2001, struggling companies dependent on infusions of cash suddenly find the tap has dried up, including the one filling the Shari’s Berries basket. “It became almost impossible to raise money, and the amount of money needed to fund a company like ours, to do new facilities and hire the right people, the funding was not there,” Ewing says.

Attack of the Suits
In February 2001, the board — which, among others, includes the Wongs; Dr. Robert Pepper, former CEO of Level One Communications before he sold it to Intel; marketing consultant Bob Sheldon; and Zaida Klein, who started USCS International, a large software and billing services company — hires Kevin Beresford as CEO. Beresford ran International Business Solutions, a business he co-founded to develop software for wholesale distributors.
    At Shari’s Berries, Beresford finds a struggling company with a great idea and hard-working people who have no idea how much the company is spending to produce its revenue. Beresford says via email: “I was hired due to a need to have a professional and experienced manager implement financial reporting and controls, as well as establish the company’s ability to scale the business, integrate to its partners and drive costs out of processes while also formalizing marketing and sales plans to grow.
    “At that time, Shari, the CEO and chair, stepped down as CEO, and Chris Ewing, who was the president, was made VP of corporate development to concentrate on raising money to support the company’s growth. Shari and Chris both left the company in the summer of 2002.”
    In an interview Beresford remains constrained about his dealings with Fitzpatrick, but the words offer a stark picture, and Fitzpatrick looks back on this period with less-than-charmed memories. “I’ll take the heat when something goes down, but I want it to be my decision,” she says. “I like detail. I want to make sure it’s done right. And it comes with being a sensitive person. It hurt my feelings that they were changing my art work. I look at my product like art.
    “It was my baby, my creation, and they’re coming in trying to save two cents on a piece of foam,” she continues. “I was told at a board meeting that it just wasn’t good to have a real person make the contribution (to the company’s direction and product line development), because of Martha Stewart, who was getting in trouble about the same time. They wanted to do it their way, and I felt I could no longer make a contribution. The company was having a cash crisis, and that was the excuse.”
    Beresford, Ewing and Fitzpatrick all agree there wasn’t ever enough capital. Fitzpatrick estimates that the company needed another $2 million to get up to speed and steady, and one investor seemed willing to put in half that. But it never materialized. “It was a good company, a good experience,” Ewing says, “and we all wish it could have been more successful. But we worked as hard as humanly possible, and sometimes in business the economic environment doesn’t turn out the way we want.”
    In all, Fitzpatrick says, the original Shari’s Berries received about $4 million in cash infusions — loans from investors who have since been repaid. Another $1 million came from investors for equity share purchases in the company.
    By 2002, it is clear to Fitzpatrick that she has no say in steering Shari’s Berries, although she retains management of the four local stores. Fitzpatrick leaves and says the pain she feels is like what she imagines follows the death of a child. She heads to her five-acre spread in the foothills outside Placerville. Yet throughout the mourning period, she continues to work at her stores. She also becomes a poster child for female entrepreneurs. Bottling her true feelings, she finds herself telling hundreds of women how marvelous it is to be an entrepreneur.

Damsel in Distress
Last summer, word came that Provide e-Commerce, a subsidiary of the publicly traded Liberty Media, has Shari’s Berries in its sights. Fitzpatrick consults with now former board member Zaida Klein, who is working as a business consultant.
    “My advice to Shari was to ask, ‘What do you enjoy? Life is short, so if what you like to do is create products and get out there and share your products, then go do that,” Klein says.
    Fitzpatrick, this time accompanied by attorney Michael Kvarne of Weintraub Genshlea Chediak and an intellectual property specialist, meets with representatives of Provide to negotiate her formal exit from the company. On the last day of August 2006, Provide purchases Shari’s Berries. “I was cut loose,” Fitzpatrick says.
    Finally, when the company is sold, Fitzpatrick receives no cash, but her negotiated agreements call for a royalty from Provide if, say, a Citrus Heights customer orders through www.berries.com. Provide keeps everything ordered from outside the local area. Fitzpatrick retains the local stores, too, which provide her with cash flow to start over again online.
    Beresford, who remains president of Shari’s Berries, points out that in the three years since Fitzpatrick left, the online Shari’s Berries Inc. tripled its revenue and doubled its product offerings. Also during this time, the product has been featured on TV shows such as “Wheel of Fortune,” “The Price is Right” and “The Apprentice,” and it made Oprah’s O list in September 2005.
    According to Fitzpatrick, the negotiations with Provide do not include a “noncompete” agreement, which might prevent her from starting a competitive business nearby. “I’m a little hillbilly girl. I never took a business class. My mom let me be idependent. I never had a curfew growing up. She wanted me to work hard to be successful, and it was hard for me to lose control of (the online) Shari’s Berries. I was so overjoyed in creating that company, and the suits and ties pushed me aside.
    “I will say that I was out because I didn’t have a big fancy degree, that I wasn’t taken seriously; but I think it’s more than a degree. The whole magic thing was getting lost with the brand.”

The Moral of the Story

So Fitzpatrick has started her own online gift foods store called The Berry Factory, and on Nov. 20, 2006, www.berryfactory.com went live. Already she’s been featured on Whoopi Goldberg’s talk show.
    The Berry Factory has new confections such as apple wedges dipped in caramel and chocolate and dusted with cinnamon. “It’s an apple pie in one bite,” Fitzpatrick says, ever the marketer. She must be careful her new products do not step on those sold at Shari’s Berries.
    She’s still selling chocolate-dipped strawberries that look like bunches of flowers, but only at her stores. She is prohibited from selling her signature creation online since it’s patented, and the patent is controlled by the company she originally created. “They’re watching me like a hawk,” she says of Provide.
    Sadder, wiser, battered but not beaten by her bittersweet experience, Fitzpatrick is the quintessential survivor. “I gained so much more than I lost, and when I look back now on Shari’s Berries, the technology and the systems, I’ve taken that and moved on, and we’re going to boom again.” As she speaks, you can hear the pain drain from her memories; the tough businesswoman takes over and the Shari tale magic revs up again.

What Shari Learned the Hard Way

“Trust yourself. You have the best idea of what the product should look like, how it should come across to people and how the company should grow. I was in the field for nine years. I believed I was the expert. But, when the suits and ties come in, then it becomes about numbers. It can’t be all about the money; it’s got to be about the product and what you’re doing.
    “Go it alone. You need to call the shots. You can have partners and give part of the company, but never get below 51 percent, because you lose control.
    “Bring in experts, but don’t sell your soul. You will need help, but be careful who you trust, do plenty of due diligence and understand who makes the final decisions. A great lawyer helps.
    “Bigger is not always better. Don’t concentrate too much on the top line. Know the old rule: It’s got to be about the bottom line. Just because there’s more revenue it doesn’t mean the bottom line is bigger.”

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