Building a Better Cookie

When you open the door to Houston Hall, the smell hits you first. The air in the hallway is laden with cinnamon, butter, vanilla and melting chocolate. It’s warm and sweet — a bit like the smell of your grandmother’s house on steroids — and more than anything it makes you want cookies.

If follow the smell down the curved dark wood staircase, you’ll find, nestled in a cove next to Penn’s most popular dining hall, a little cookie store called Insomnia Cookies. In a glass display case, they have all your favorite types — chocolate chunk, M&M, Peanut Butter.

This week, they’re having a three cookies for $3 special for finals, which the girl in front of me is busily tweeting about. “Such a good decision,” another customer named Juan says, biting into a chocolate chunk cookie — the company’s most popular offering. “I needed this to get through my stat final.”

At college campuses across the country, students like Juan are cracking open their books and ordering a pizza box full of warm, melty cookies. The 10-year-old company has done extraordinarily well in the last three years. This year alone, they’ve opened 20 stores and have six other stores planned to open in the next three months.

However, the increasingly big company has humble roots in a house only a few blocks away from Penn’s campus.

In 2004, Seth Berkowitz, who was then a Penn junior majoring in economics, started a cookie-delivery business in his off-campus house on the Beige Block. “Living in a house with nine guys who are ordering food all throughout the night, its a very logical business to develop, you know?” he says. “And 10 years ago there weren’t nearly as many options. There was no Chipotle or Bobby’s or Sweetgreen. There was maybe gross pizza and the diner was always there. The late-night options were not always the best.”

It was less common in the early 2000s for students to start a company while at school. “The world became a startup world. I don’t think I was in anyway — I don’t think I had anything to do with the fact that it’s like that now,” he says. “When I graduated it was before the crash so everyone was trying to get into finance — working very hard to get into banking — and the world shifted very much into the tech startup.”

Initially, Berkowitz was a one-man-cookie-band, wearing all the hats at the company. He developed the recipe with the help of hid girlfriend, who is now his wife, during the summer at home in Rockland County. He then stood outside Penn’s Hillel and handed out free cookies to market the product in the fall. “The cookie that came out of that was pretty good. It wasn’t amazing. It was pretty good. It has since evolved many times over,” he says.

After making the batter in advance, he would bake the cookies to order then deliver them to student’s doors himself. “There wasn’t a ton of orders so it was something that I was able to do myself for the first two months,” he says. “It was really hard.”

The company’s popularity increased five-fold after a profile on the front page of The Daily Pennsylvanian, and the company eventually moved into into a commercial facility in Center City, where it made cookies exclusively for delivery to Penn, Temple and Drexel. The company was profitable enough that while still in college, Berkowitz was able to pay for the space.

Today, Berkowitz is hardly a scruffy college kid searching for a better late night snack. He has a shaved head and is dressed neatly and stylishly in a blue half-zip sweater, jeans, medium brown men’s dress shoes and bright blue striped socks. He speaks confidently but calmly, mostly about the business, not the cookie. Conversation centers more on the challenges of running and growing a successful company than melting chocolate.

“He’s very energetic, which is good for a CEO. He’s high energy and keeps everyone excited about the business, and he’s easygoing,” Perel says. “There’s very little micromanaging.”

To that point, his New York City office has a very different smell — that of fresh paint. Due to recent expansion, the company recently moved to more spacious digs overlooking New York’s Park Avenue South. Outside the glass wall’s of Berkowitz’s ultra modern, glass-walled office, a long row of employees is working with long spreadsheets of numbers. There isn’t a spatula in sight.

Insomnia Cookies has moved frequently in the past few years to accommodate the company’s growth. On the wall of the office, there’s a list of a half dozen new cities and college towns where Berkowitz hopes to expand soon. They also have a much larger “operations office,” which houses a training center and call center, both located in Philadelphia. “Our goal is just to grow — grow fast,” he says.

Berkowitz is also no longer baking in his kitchen. The cookies are made in New Jersey but baked at the stores — hence the pervasive scent of cinnamon. “When you bake a cookie fresh and you have a convection oven, which is a circulating oven so there is a lot of air spinning around, when you you open up the door it shoots out the air — the smell — and we’re baking constantly,” he says “I actually think its one of our — I mean the flavor is our biggest draw, but [the smell is] a close second when people smell it and say ‘What is that?’ and they come. It’s wonderful marketing.”

“A lot of people think we actually spray the smell. Yes, that is a very common question” he adds. “Someone once asked me if there was a way to bottle it. I don’t know how we’d do that.”

New cookies are also on the way with lemon macadamia nut and cranberry oatmeal options slated for later this year, Berkowitz says.

“There’s always something new we’re looking towards,” Greg Perel, the company’s director of finance, adds.

After graduating from Penn in 2004, Berkowitz looked to expand the company to college campuses outside of Philadelphia. He stresses that building a startup is difficult. “People very much idealized the process of starting a business, a startup. It’s brutal,” he says. “Anyone who says it’s not is either really lucky or delusional.”

“You have to bring people in and help them be great at it while you’re learning the business yourself. It’s hard, really hard.” He paused, considering. “But it’s rewarding when you get to the end of the tunnel. It’s nice to have something that you worked at so hard and something that you own.”

The company spent seven years figuring out what model worked for them and had a few false starts. One of them was one was an investment in food trucks, one of the most ubiquitous foodie startups.

The trucks initially seems like a great idea. “We were struggling to find spaces on college campuses that fit our cost requirements and size requirements,” Berkowitz said. The trucks solved this problem: They could simply be parked on the street. They also made economic sense. A food truck is about the size of a small store and costs about the same as fitting out a new store. The maintenance is lower than the monthly rent.

“We tried it a University of Michigan, and it was phenomenal. We tried a second one at University of Wisconsin — fantastic. And then we made a big investment in trucks. We built out six trucks,” Berkowitz remembers. “Unfortunately, we were moving a bit too quickly.”

Michigan and Wisconsin both became less receptive to food trucks. Wisconsin rewrote their laws, and suddenly the Insomnia truck was too big to be legal. Michigan no longer wanted trucks on its main street.

Today the only remaining trucks are located at Temple and Drexel universities — tantalizingly placed outside the library. The company has not built a truck in over four years.

“We were moving so quickly. We were like, ‘Trucks seem great. Let’s go into trucks.’ In the meantime, retail was evolving to a place that was very successful,” he says. “Even though we made this investment in trucks, retail proved to be the way of the future for us.”

Other unsuccessful ideas? “Yeah we tried cupcakes briefly. Cupcakes are much more small batch than cookies, so it was hard to make a scalable solution to that.”

“Our expertise is cookies ... We’re pretty good at delivering cookies,” he added.

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