At Great Harvest Bread Co. in Dillon, Mont., two employees work on research and development.

Most of the great ideas that drove sales of $60 million at 140 franchises in 1998 came from the people who own and operate those stores. It does Pete and Laura Wakeman proud. It was their vision that attracted those franchisees. "That the owners are closer to their customers works to stimulate good R&D," they say.

Distributed R&D is just one of several ingredients — no debt, controlled growth, plenty of play, freedom to the franchisees — is their recipe for success. "Our businesses are a means to greater ends — a happy, meaningful, fulfilling life," they say.

In return for local autonomy, franchisees innovate — and share. Marian and Dennis Cihack of the Omaha, Neb., store, for instance, created the Bakery for a Day concept. Members of a local charity help in the kitchen for a day. In exchange, their group gets that day's proceeds.

"Now everyone's doing it," says Tom McMakin, Great Harvest's chief operating officer. In Great Harvest's Internet-based "community of learning," ideas are the lingua franca, and other franchisees are friends, mentors, teachers.

"Instead of looking for standardization, we use franchising to create a community of learning in which our owners can profit from their experience," says McMakin.

Great Harvest sees that as a competitive edge. "Most franchises are about command and control," Pete Wakeman says. "We've always had a model of freedom. Our owners are not required to do anything except hang a sign out front."

After baking bread to put themselves through Cornell University, the Wakemans migrated west to the hiking and camping of Montana. Customers of their first store in Great Falls envied their ability to take the summer off and head for the hills. Some customers wanted more than bread; they wanted in on the secret. Bingo. The Wakemans sold their bakery, moved to Dillon, and started sharing the dream.

In 1998, Great Harvest fielded 7,000 requests for franchises. About 700 were highly qualified, but only 15 were selected. Why so few? Simple: It's part of the plan to let profits guide growth. "We like to grow at 20% a year," McMakin says. "We've never grown more than 27% in a year."

More Rapid Growth Calls for Unacceptable Sacrifice

"We're not eager to buy debt," McMakin says. "We don't have banks, angel partners, equity partners. The result is that we've retained control of the business.

"When you get investors, they want you to work your tail off 80-100 hours a week to boost the returns so they can maximize their investment."

Pete and Laura Wakeman work 20 hours a week. They take off June, July and August to travel. "One thing that marks our culture as unique is the '40-hour rule,'" they say. "Any of us can get fired for working more than 40 hours a week."

Writer: Stu Watson