Using a Line of Credit to Expand into Hundreds of Stores with Hiatus Cheesecake

Jordan Buckner: [00:00:00] Getting funding to support your business growth is the number one concern I hear from founders every week. How do you get access to the finance saying you need to make an impact and actually build your business as it continues to grow? So I've invited on Matthew Featherstone who's the founder of Hiatus Cheesecake to share his story both in terms of getting started with the company, but then how that financing journey has changed over time and how he's been able to get access to funding to actually take on new distributors and new accounts.

Matthew, welcome on. 

Matthew Featherstone: Hello, thanks for having me.

Jordan Buckner: So tell me a little bit about Hiatus Cheesecake for those who don't know. Describe what the product is and How you came up with it. 

Matthew Featherstone: So we are a wholesale cheesecake manufacturer. We specialize in single serve portions. But we have a gourmet cheesecake that we sell to grocery stores and restaurants and all over.

The name is hiatus. It represents a temporary break from your diet. That's the single serve portions to help you with portion control while enjoying a [00:01:00] gourmet dessert. So it all started when I was young and my mom used to bake bread every day. And I will be in the kitchen with her baking. One day, a cousin came in with a cheesecake from Cheesecake Factory.

I tried it and became obsessed with cheesecake. Just started, found a recipe, started making cheesecakes. It turned into me making cheesecakes for family, friends, and events. Eventually, I ended up in the restaurant industry as a bartender. One day, randomly made a cheesecake after probably nearly a decade.

And the owner of the restaurant, My executive chef and my co workers were so impressed that they convinced me to go into business. So that's exactly what I did and I created hiatus. While working there, the owner of the restaurant and her family kind of took me under her wing and they helped me move with my R& D process.

And I learned that most restaurants were outsourcing desserts, so they actually ended up becoming my first customer. It was a fine dining restaurant in National Harbor, and I was able to use their name to leverage my way into 10 other restaurants. Within the DMV 2019, I became a vendor of Cisco and I was in about 40 restaurants a pandemic hit, so of course I had to make a few pivots because all the restaurants closed.

And [00:02:00] decided to pivot into retail became a vendor for Whole Foods markets. I also started selling to hospital cafes we were in the university of Maryland medical centers in Baltimore. So later on in that year, well, yeah, I think that was, 2020. So in 2021, my business partner, Brandon came on board in August and we grew into about 30 grocery stores.

Be onboarded with range me to range me. We were featured on QVC and HSN as a spotlight business. We learned about the Kroger go fresh and local business accelerator, which we did apply to. We were one of the five winners back in 2021 and decided to take the journey into building out a supply chain.

More recently, we have partnered with co packers. We have one coming on board. Next month and then two more coming on next year. And then through the Go Fresh and Local Business Accelerator, we also were introduced to Gourmet Foods International. So they are our distributor with Kroger as the anchor account.

And then we also brought on Savile Food Service and we have several restaurant chains and other food service opportunities that are anchors accounts [00:03:00] over at Savile Food Service. So that's how we started and that's where we are now. 

Jordan Buckner: Man, I love it. You know. You talking about like baking bread with your mom.

That's how I got started in food. My mom's a chef like not a at the time she was like actually going through culinary school, but like making brownies and cookies and started to just like sell those around the neighborhood and eventually like turned into a business and she has a catering company now, but it was like in the kitchen, like baking.

She loved making cheesecakes too. So it's like making cheesecakes. And that's really what kind of started my level , of food from there and how I got into the food industry. It's wild just like, you know, hearing your story and getting started in restaurants and now kind of growing the business and the retail and Kroger.

Is the business kind grow how you were expected to, or like what have been some of those challenges? I mean, you had to navigate COVID business is pivoted towards retail a little bit more. What's just been , your experience over the last couple of years? 

Matthew Featherstone: Well I think the, during the period that I was selling to the restaurant, I guess from 2016 to, I think I went full [00:04:00] time in 2020 during that time, I actually got a chance to really like perfect my product and then also to see what the product meant for people and how many people really enjoyed it.

So that kind of really strengthened my belief in what I had and it gave me this resilience of like once I. Got, you know, into tight situations. I just had to Figure out how to make it happen. There was no other choice. I mean, there were times where I would like something was wrong with my car. I would be, you know, the little scooters that they have in the cities.

I'll be literally on scooter and doing deliveries to rest of the parts. I hear you. But so whatever it would take in order to keep my business afloat, whatever knowledge I need to get by joining cohorts. I did one here, Loyola Duke University. I did the one with Kroger. I'm currently in one now whatever knowledge that I need to grow, whatever network that I needed to build or get access to, I really put, we all, my team before for serious effort , to build their environment that we need to, in order to be successful.

Jordan Buckner: So I love that you started it while you're working at the other job, because I think that added probably some stability [00:05:00] to be able to support the business as you grow. Have you raised like money from investors or is it all self funded and with loans? 

Matthew Featherstone: We are right now in the middle of a raise with, for investors that be our first raise we're going after a 1. 5 million raise. But in addition to that, I'm a big part of, you know, the finance piece as we've been growing. It was, we linked up with Aion Financial. And they've helped us through a lot of the growth when it comes to like POs coming in as we were growing, especially once we launched into Kroger, that was a big part of how we were able to grow.

Jordan Buckner: I love that. I mean, I know Aion, they're one of our partners at Foodbevy. Yeah. What's also, they are able to provide working capital for founders and for brands so that you can grow without having to find like purchase where there's no stuff , from investor dollars, right? And you don't get that money back.

Tell me about kind of what was going on leading up to, you know Yeah launching with Kroger because you went from just like making a couple cases to making pallets worth of [00:06:00] material Tell me about that journey. 

Matthew Featherstone: Yeah, so that started in August of last year is well we launched in September, but we Got our first big POs and artists.

So leading up to it we had gotten a grant and took out a loan to cover the initial big orders because at that time we launched into Kroger and the restaurant groups at the same time. That's wild. I'm glad you didn't do that to yourself. I know, right? It was insane.

Well, that initial investment funded that. And so we got through it. Thousands of cheesecakes. I think we made 10, 000 cheesecakes that month. Wow. And then the following month, you know, the orders, you know, there was not as much as the first one, but we ended up, they ordered right back again the next month.

And then we got another order for the following month. So I ended up winning a pitch competition here in Baltimore. It's called Crab Tank Pitch. It's a part of Baltimore Homecoming. And that funded the rest of the winter. And then, of course, the order P. L. started, kept getting larger and larger because we were selling more and more.

So then we learned about Brandon found out about Aion Financial And so we started [00:07:00] engagement with them. And we got cleared to be a part of their financing program. And that actually has helped us get through every single PO this year. 

Jordan Buckner: Wow. That's lot to have to deal with.

I think that's one thing that founders learn over time is that the more you grow, the more money you need and it just keeps getting bigger and bigger and bigger. Why don't you keep getting bigger and bigger? That's the goal. Yeah. Which is great. And you have to find the right resources to manage that. So tell me about the process of applying to Aion.

What are the kinds of things that you need to be, that you have to be like a profitable business? 

Matthew Featherstone: Certainly I don't have to be a property business and they pay me. I mean, with all institutions in that way they need to certainly be able to see your path to growth and we were able to clearly show them, you know, everything that we had coming down from the bucket and proof behind that and then as the, basically the way it would actually work is we, we get a PO come in we could borrow against, you know the funding that they allowed it, that we could have.

And then once we [00:08:00] borrowed against that we could either have the option of once the, no, our net terms are pretty good. We're on a net 10 and then that net seven. So, you know, it's a quick turnaround, which was worked out. So I'll benefit. We could even pay it right back or for us, it was smarter to kind of go the six month term that they allow you to break out it in installments.

Which was. I mean, when you constantly have PO's coming in that way, it makes it a lot easier for you to turn that payment around. And it worked, that's been been working out great for us and we've been growing with them. We just added on. Baltimore Convention Center, Camden Yards, and M& T Bank Stadium coming in next month.

So, because of us having that funding, we've been able to continue to scale into opportunities like that. 

Jordan Buckner: Yeah, that's amazing. Hey, you mentioned that you're working to raise another 1. 5 million round now. How are you thinking about using that kind of investor RIT fund investor fundraising versus continuing to use like debt financing?

Matthew Featherstone: So the investor fundraising is going to be [00:09:00] at a much larger scale. So we have, that's going to support the CoPackers coming on. So our facility, I think we are going to kind of clock out at about a truckload a month is what we will probably be able to get up to. But of course. You'll have to purchase equipment.

We have to increase our team and of course, some of the funding will go towards that for the investor raise but a great majority of it is going to go to bring in on the three co packers. Two of them can do a truckload a week, and then another one can do up to a truckload a month. And then we have plenty of growth to do.

We're supposed to be trying to launch into about 1200 store with Kroger's over the next several years. In addition to that. We have interest from, you know, Piggly Wiggly and the Jacob Javits Center in New York. We had interest from Delta Airlines. So we have all of this, El Marriott and different hotels.

So we have all of this business that are literally just sitting in a bucket waiting for us to be able to fulfill the demand. So that 1. 5 is really going in to increase that. But the cool thing about it is that with Aion you know, We'll be able to still [00:10:00] sustain the purchase order process while we're funding the growth of paying for equipment and paying for, , basically the whole growth of that process, marketing, you know, everything that you can think of.

So Aion is still going to be very instrumental in making sure that when it comes to purchase order going in and that being funded to continue to make sure the revenue comes in back in they're going to be very instrumental in that process. 

Jordan Buckner: Yeah, I think that's one thing that is a misconception that I had when I first started was that like all money is just the same money and like when it's in your bank account.

But the reality is that. Investors are interested in funding some aspects of the business, but not particularly everything. Debt financing and lines of credit can help with other areas of the business. Usually when you have like a visibility to paying that back from orders for revenue, right?

Versus a lot of times investor dollars are looked at from growth perspective. And in some cases like assets or people. that you need to bring [00:11:00] on. And so usually it's not like one or the other, it's kind of both, and that you might even need to find multiple different types of financing as well to add those up.

Matthew Featherstone: Yeah, we're trying to do it all. You got to be doing grants. We have more pitch competitions because, you know, that's another big way to get, you know, revenues coming in. So you got to diversify all around, you know, and it's always important to have access to funding when you're growing. 

Jordan Buckner: Yeah, I love that.

The I want to go back to something too. You mentioned that you're, you bring out three contract manufacturers at one time? 

Matthew Featherstone: Not at one time. It was over the course of a year's time. So by this time next year or once the fall of next year, all three of them should be on. 

Jordan Buckner: Tell me about the decision. Is it about having, like, are they spread across the country or is it really just about capacity?

Matthew Featherstone: They're spread across the country. So we have one, we have two in the Midwest though, but one is Chicago and one is Kansas city, Midwest is where the majority of a lot of supply chain is kind of central. So most large distributors will have, [00:12:00] you know, DCs that's just within like a hundred miles or so from the Copackers , same thing with packaging.

So it's a really great place. Then on top of that, the freight's a little bit different. No more cost effective because it's two day distance either way which certainly helps. So that was the decision behind having multiple. The other one is on the West coast. The West coast is a completely different beast.

It's a lot more expensive. So it's more or less diversifying the supply chain that way. It allows you, it protects your supply chain because. And then are your cheesecakes refrigerated or frozen? Yeah. They travel frozen but when they're displayed in, you know, dessert cases or, you know, within the grocery stores, they'll be inside of the refrigerator as a grab and go.

So it's a small, little, you know, single serve grab and go portion. 

Jordan Buckner: So the I mean, that's one thing that's always complexity, right, is having to deal with frozen and refrigerated shipping, because that adds cost, right? So a lot of people might think, like, oh, just have, like, one manufacturing facility. And they can do everything and have the volume, but you also have to think about transit times and [00:13:00] other partners and costs from freight, because freight can be significant for brands.

Matthew Featherstone: For sure. I think with us, So we have identified some frozen freight companies. And those are more, we use those more as like backup. You know but right now, all of the distributors that we're with, they have, you know, frozen or refrigerated trucks. So we just either have them pick up directly from us currently until we can get our own trucks.

And that's if we necessarily would need them that's only if we were sending from our own manufacturing facility, but. Other than that, if the distributor is not picking up from the facility, then we'll just use our backup frozen freight companies or refrigerated freight.

Jordan Buckner: I like that. I know you're still on the journey, but what advice would you share with other founders about how to think about getting access to capital, applying for grants, getting fundraising so that they can kind of be prepared for the growth of their business?

Matthew Featherstone: Start as early as possible and just cause it should never stop, you know, you should never not be looking for some way to fund or finance that is just a part of [00:14:00] what you'll always be doing. So make sure you keep it very diversified and look at every opportunity. anywhere, when you're ready for an investor raise then of course that'll be included as well.

But initially, before you even get there, it's going to be all debt and grants. You know, and just keep your eyes plugged, get into whatever networks we're here, you know, those are and that actually will support you being able to get to the point where you are looking for an investor. But yeah, and then another for small businesses that are looking for funding.

It's very, very important to make sure that you have. Very tight books. So if you can afford a a bookkeeper, make sure that you have a very good accounting system, you know, cause when they come in and they're asking you for to see your books over the last six months, you'd really need to be able to produce those PNLs, cash flows and balance sheets in order to get that investment that you need.

Jordan Buckner: No, I love that advice too. You've been doing this for a number of years now. I'm curious, like what excites you about what's next and what are you kind of most looking forward to for the rest of this year and next year? 

Matthew Featherstone: I just really can't wait to these [00:15:00] copackers coming with.

Oh man, it can't happen soon enough. Cause right now it's like, it's a lot to produce, you know, it's a lot. So once those systems are completely locked in I'll be happy that I'll have manufacturing locked in and I can kind of really focus on R& D and marketing and create a new product. I have a lot of new ideas.

I just actually created a Baltimore Raven's cheesecake. 

Jordan Buckner: Oh, that's fun. 

Matthew Featherstone: Yeah, it's a brownie cheesecake and ube sweet potato. Oh, that sounds delicious. Coming out at the end of August. Is it only going to be in Baltimore or can I like order that? Currently, it's just going to be, I'm assuming, Launch it, we're launching it first off over at the M& T Bank Stadium.

I shouldn't be able to talk about this. I don't know why I wouldn't, but we launched it at first there and I do have plans to kind of migrate it around within the Maryland area for, cause I know Reagans fans buy it wherever they found it, see it. But currently, yeah, it's just going to be in Maryland for now.

Jordan Buckner: And I hear you on the production side with [00:16:00] TeaSquares we went back and forth between self producing and having manufacturers, because we had three failed manufacturing trials with different manufacturers for our energy bars, ended up having to keep making ourselves, we had like a team of five people who were manufacturing everything, And, you know, it is like I was, I was talking to some other founders and it's really like running two different businesses.

You have the manufacturing business and then you have the brand and the sales kind of organization and they work together. But the whole like mindset and how you spend your day and the concerns are completely different. 

Matthew Featherstone: Yeah. Yeah. It could turn into mind mush really quickly. 

Jordan Buckner: I remember you and just like, you know, we're like, all right, we got to grow and do this.

But then. You know, one of our employees, you know, something happens and they quit or leave as like, Oh, now we have to stop doing that. We can't produce. We got to go back and like deal with this issue. And then morale's kind of down and we have to find something like, Oh, man. 

Matthew Featherstone: I'll be happy when that process is I can at least rely on someone else to do the [00:17:00] production.

And I can just really focus on building the R and D team here. You know, it can eventually turn back into manufacturing here as well. I think for now, for us to focus on brand. Marketing and new ideas. It really will help the growth while they're producing. 

Jordan Buckner: That totally makes sense. Matthew. Thanks so much for being on today.

We just made a cheesecake. yesterday, my wife and I, and so I'm going to go hop up and have a blueberry cheesecake after this call. But I definitely appreciate talking with you. I've got to try hiatus and for anyone listening, I'm going to put the info down in the show notes so they can check out hiatus, support you and try your products.

And then, you know, looking forward to all the growth and all the success that's to come. 

Matthew Featherstone: Thank you. Thank you. Thank you for having me. 

Jordan Buckner: Of course. Thanks.