Prioritizing Operational Control and Earned Growth Over Franchising

In this session of How I Built This, Insomnia Cookies founder Seth Berkowitz explains that scaling a business is not about how fast you can expand, but about earning the right to grow through a strict feedback loop. While many believe scaling requires franchising to reach 1,800 locations, Berkowitz argues that keeping full control over operations is the only way to protect the product quality that keeps customers coming back. The hidden risk of franchising is that it dilutes innovation and quality, often creating a ceiling that stops a brand from staying relevant over time. This analysis helps founders caught between the urge for rapid growth and the need for operational stability, providing a guide on how to use customer behavior to drive long-term success.

The trap of grow, grow, grow

Many founders treat growth as a strategy, but Berkowitz believes it is a reward. When a company expands faster than its brand awareness, it creates a structural weakness. The system does not just fail; it becomes costly to run because the company must pay to create demand that is not naturally there.

> "I believe you earn growth. I think you earned the right to grow. Consumer love gives you license."
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> -- Seth Berkowitz

By focusing on earning growth rather than hitting arbitrary targets, a founder avoids the mistake of moving into markets where the product lacks cultural traction. This requires the discipline to stay involved in the details of the business, tracking metrics in specific areas rather than just looking at top-level growth numbers.

Why simplicity creates a competitive moat

Early-stage companies often feel the need to broaden their offerings to capture more market share. However, Berkowitz found that this often hides the core value of the business. By cutting his product list down to a core set of items, he built a repeatable system that allowed for faster innovation. When the core is solid, you can test and launch new ideas without the complexity or pushback that slows down larger, less focused organizations.

> "I sold frozen yogurt, I sold cupcakes, I did everything... ultimately what won was reducing the skews down to the core. And then once that became incredibly well known, then you add platforms around it."
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> -- Seth Berkowitz

This approach creates a lasting advantage: by being great at something simple, the brand becomes a ritual. Rituals are sticky; they survive market changes because they sell a consistent experience that customers make a part of their lives.

Solving the buyer-user disconnect

A common point of failure for growing brands is the gap between the person who pays for the product and the person who uses it. Carol, founder of Desden, faced this when she realized that moms and grandmothers were buying her stadium bags for their daughters. Berkowitz advises ignoring the buyer's motivation and focusing entirely on the social currency of the end user. If the student finds the bag culturally relevant and worthy of social media, the buyer will follow.

The result of this strategy is a self-sustaining marketing loop. When the end user loves the product, they become the primary acquisition channel, which reduces the company's reliance on expensive, high-churn advertising platforms like Meta or Google.

Key action items

• Audit your core (Immediate): Identify the 3-5 products that generate the majority of your revenue. Remove the secondary offerings that complicate your operations and dilute your brand identity.
• Map your earned growth (Next Quarter): Instead of setting expansion targets based on capital, set them based on brand awareness metrics in specific, testable geographies. Do not enter a new market until you have earned the demand.
• Prioritize in-person feedback loops (Next 6 Months): For products that require education, shift focus from digital ads to physical partnerships. Use local studios, resorts, or pop-ups to get the product in front of the customer, where they can touch, feel, and see the ritual in action.
• Leverage social currency (12-18 Months): If your buyer and user are different, stop marketing to the buyer. Build your brand's cultural relevance with the end user. If the user treats your product as social currency, the buyer will naturally be pulled into the ecosystem.
• Build data into the product (12-18 Months): Integrate mechanisms, like QR codes or unique digital experiences, into the physical product itself. This allows you to capture data on the end user, which you can later use to refine your marketing or pitch to wholesale partners.