Wetzel's Pretzels recipe for building an empire

The Wetzel's Pretzels story: By the numbers
The Wetzel's Pretzels story: By the numbers

In 1994, two marketing executives from Nestle sat down at a bar in Seattle and penned a business plan for a pretzel joint on the back of a napkin. More than 20 years later, Bill Phelps and Rick Wetzel have built an empire.

"We wanted to be the Ben & Jerry's of the pretzel business," Phelps said. "And we wanted to be the creative ones, we wanted to have the new ideas, we wanted to have the fun irreverent marketing."

Wetzel's Pretzels is known for its innovative flavors — Jalapeno Cheese Melt, Almond Crunch and Pepperoni Twist, among others — and Phelps says the company has logged seven straight years of same-store sales growth.

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The privately held company recorded $143 million in sales last year and plans to have 325 stores open by the end of 2016; it already operates 10 shops in Disney parks.

To be sure, Wetzel's still faces big-time competition in the hot-pretzel market. Auntie Anne's is the industry giant, with more than 1,600 locations in 48 states and more than 25 countries.

For entrepreneurs looking to launch a successful business and keep it thriving, Phelps has a few tips.

1. Create a positive office culture

If you want your business to run smoothly, you'll need an office filled with happy, productive employees, Phelps said.

"I have no turnover at the company. I have 13 people at headquarters running this $160 million systemwide sales and nobody has quit in 10 years," he told CNBC. "So, it's a fun, enjoyable atmosphere. We have a very lean, very efficient operating team and we do great for our investors and our franchisees."

Offering your employees massive perks doesn't hurt either.

Wetzel's Pretzels employees have been to Los Angeles Lakers games, concerts and even wine tours. During the summer months, they get half-days on Fridays.

Wetzel's CMO Jennifer Schuler, who was hired by Wetzel's in late 2014, noted that she has already attended the Grammy's, gone to a private John Fogerty concert and met the famed Laker's player Kareem Abdul-Jabaar.

Phelps stressed that it is important for employers to respect their employees, pay them well and to be flexible.

"I am very empathetic to working mothers," Phelps noted. "A working mother—that's a hard life. You work all day at work and then you go home and that's another shift. And a shift in the morning with the kids."

2. Great ideas come from franchisees

Some 95 percent of Wetzel's Pretzels locations are franchised, and Phelps says the majority of the company's pretzel innovations come from the franchisees.

Franchisees and their employees are encouraged to create new flavors and are rewarded for their efforts. Staff members whose pretzel concoctions run as a limited-time promotion receive $1,000, and recipes that become permanent menu items are rewarded with $10,000.

"We just paid out a husband-and-wife couple, they came up with the idea of Pizza Bitz," Phelps said. "You take a little bit of pretzel, you put cheese and a pepperoni on it and they are selling like crazy. It became 7 percent of our business in a one- year period."

3. This is not a dress rehearsal

Phelps also puts his chutzpah to work for the business.

Like that one time, when he sent hot pretzels to Jay Z and Beyonce when they were sitting courtside at a basketball game and then rolled up afterward to ask how they liked them.

Representatives for the hip-hop royalty did not immediately respond to CNBC's request for comment.

Bill Phelps, CEO of Wetzel’s Pretzels offers pretzels to Jay Z and Beyonce.
Source: Wetzel’s Pretzels

"Rick Wetzel has a great line, 'this is not a dress rehearsal in your life'," Phelps said. "So, if you have an opportunity, you take it. You rarely regret the things in life that you do, you regret the things in life that you don't do."

Similarly, when Arnold Schwarzenegger was running for governor of California, Phelps made a toast at a fancy dinner and caught the attention of the actor and his wife, Maria Shriver. That went so well that Shriver later invested in Blaze Pizza, the other restaurant chain that Phelps and Wetzel own.

Representatives for Shriver did not immediately respond to CNBC's request for comment.

"I hit the grand slam." Phelps says of his career.