Auntie Anne’s: Soft pretzels out of hard times

July 8, 2013, 11:08 AM UTC

When Anne Beiler bought a stand in a weekly Pennsylvania farmers’ market, her ambitions were modest. The founder and CEO of Auntie Anne’s started the company after enduring personal and family trauma. Today it’s the largest soft-pretzel franchise in the world, and its 1,200 outlets can be found in malls, airports, and boardwalks in 26 countries. Auntie Anne’s is now owned by Focus Brands, and it generated sales of $410 million in 2012. Beiler, 64, grew up in an Amish community and credits that upbringing for much of her success. Her story in her own words:

My parents were horse-and-buggy Amish, and I grew up on a 100-acre farm in Lancaster, Pa. We eventually joined a more modern Amish sect because my parents wanted more spiritual depth. The sect is known as “black-car Amish” because it allows people to drive cars as long as they’re black. We had eight kids in our family, and we were able to have electricity to milk the cows and use in the house for necessities, but no TV or radio. When I was 17, I switched to the Mennonite Church. I never went to college. But the structure I grew up with was planted so deep that when it came to doing business, I knew how to be disciplined, create teamwork, and persevere. It set me up to be an entrepreneur and a successful franchiser.

I was 19, and my husband, Jonas, was 21 when we married in 1968. We were a happy couple, and my only dream was to be a mom. We had two daughters until my daughter Angela was killed accidentally in 1975 when she was hit by a tractor on our farm. My life turned upside down. My husband and I weren’t able to connect emotionally, and I sought counseling with a pastor outside the Amish-Mennonite community. For six years I stayed in an abusive sexual relationship with that pastor, living in guilt and shame. The pastor’s license was revoked when his behavior with several women came to light. In 1982, when I began a life again with my husband, we were living paycheck to paycheck. My husband was a mechanic, and during our marital crisis he had studied to become a marriage and family counselor. He wanted to offer counseling services for free to our community, and we needed income. So I told him, “You’ve stayed with me despite all that I’ve done. So do what you want to do, and I’ll go to work.”

A friend told me that an Amish-owned store selling pretzels, ice cream, and pizza in the indoor Downingtown, Pa., farmers’ market was for sale. The owners wanted $6,000. I was astounded at the price because those kinds of weekend stores can bring in anywhere from $25,000 to $200,000 a year, depending on the location. We had no money, so we went to my husband’s parents, and they gave us the $6,000.

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We cleaned and painted the store for three days and opened it on Feb. 2, 1988. At one point that day, I stood there and thought, “Why did I do this? I don’t think I can do this.” Then a guy came into the store with flowers from my husband. His note said, “You can do this, honey. Go for it.” All along the way, whenever I thought I couldn’t do something, there was somebody to encourage me. That’s so important to have in business.

For the first two days we made $875 and were thrilled. We sold pretzels and pizzas, and over the next six weeks I took the recipes from the previous owners and changed them to fit my tastes. The morning we launched the new recipe, the first customer to take a bite looked at us and said, “This is amazing.” From that point on, we had to bring in more help and buy more ovens. We got rid of the pizza and sold only the pretzels. The only marketing we did was to give away samples. Revenue rose to $2,000 each weekend, and at that time, the pretzels were 55¢ each, or three for $1.50. We were selling them by the dozens. It was crazy.

After a few weeks, I thought we should name the store. I have 30 nieces and nephews, and a friend said, “Everyone calls you Auntie Anne. Why not name it that?” So it became Auntie Anne’s Soft Pretzels. Things were so successful, we started a second store on July Fourth in Harrisburg, Pa. In 1988, between the two stores, we hit almost $100,000, which was more money than I’d ever seen in my whole life.

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In Harrisburg, I was selling to businesspeople and government workers downtown. That led to meeting other businesspeople, who wanted to sell Auntie Anne’s elsewhere. I kept saying no because I was happy with two stores, but people kept calling. Finally, my husband said, “I think God is telling us there’s something here we need to do. Let’s get out of the way and see what can happen.” So in 1989 we allowed friends and family to build 10 stores under a licensing agreement.

The agreement said we’d get a $2,500 upfront fee, which we used to build the store for the licensee, and 4% of the gross sales for using my recipes and my name. That was the structure we used through 1990, until a licensee said we should have used a franchise agreement. We researched and discovered that we were indeed franchising. It was an honest mistake. By then, we had 75 locations in several states. If you franchise without the proper documentation, you could be fined thousands of dollars a day per store.

So we called all our partners and explained what happened. Because we also called all the state legislators and powers that be and explained with integrity, we got through that period without one fine.

When the stores became more expensive to build, the upfront fees weren’t enough for us to make a profit. We were in the Northeast, and in 1993 we wanted to expand westward, to cover the U.S. I wanted to create five regions, with a company-owned store in each to monitor quality, and needed $1.5 million to do it.

As a company, we embraced the principle of giving. My husband was still doing counseling every day for free, so Auntie Anne’s was funding his counseling center. Three banks said no to our loan requests because they didn’t like that contribution. We found a Mennonite chicken farmer who loved what we wanted to do, and he gave us $1.5 million on a handshake. I can’t share his name, but he became our angel investor. Anytime we needed money in the next 10 years, he’d give it to us.

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We knew that people outside the Eastern Seaboard and Pennsylvania didn’t know what a soft pretzel was, so we started going to the ICSC [International Council of Shopping Centers] Convention in Las Vegas. We gave pretzels away and began to meet regularly with mall leasing agents and developers. By 2003 we were a full-fledged corporation franchiser with 150 employees. The company grew so fast, it was exhausting. I’d taken the company to a place that exceeded my expectations, and I didn’t see myself physically able to keep doing it. So I approached Sam Beiler, my second cousin, hoping he’d be interested in buying the company. He was, and we sold it on April 15, 2005. It was almost like giving up one of my kids. I cried for weeks, but I knew it was the right decision.

Today I’m occasionally asked to do an event but am no longer financially invested in the company. I do speaking and have written two books. I spend more time with my family and the employees at our Family Center of Gap, Pa., which offers the counseling services we started years ago.

Auntie Anne’s is a modern-day business miracle that never should have happened. I had no formal education, capital, or business plan. But we practiced what I call the three small P’s. We started with a purpose — counseling and helping people. We had a product that supported our purpose. Then we got the people to do it. The three small P’s, in that order, result in the big P — profit. If you stay true to your values and purpose, you will get to profit.

My advice

Tell the truth, even if it hurts. At one point the franchise department had given a franchisee 10 locations at once, including one I’d promised to someone else. I flew out, explained the mistake, and asked the franchisee to give up that one location. He said no, but changed his mind the next morning because he wanted to work with us and he wanted to do the right thing. The results benefited the whole company.

Give till it feels good. Give of yourself — your time, your energy, and your belief in your employees. We had a profit-sharing plan, and every single employee got part of the profit every year I was there.

Have faith in God. It will make you dig deeper and become a better leader. To overcome adverse circumstances, you have to learn to overcome your own hang-ups, values, and idiosyncrasies in order to value other people, cultures, and ideas.

This story is from the July 22, 2013 issue of Fortune.