How to negotiate margins & equity + reduce your unit costs w/ blanket orders with Remi of Freck

Today we’re learning some serious stuff about the beauty industry from Remi, the founder of Freck.

Let me ask you something… Do you know what a blanket order is? I’ve done over 200 episodes and this has never come up!!!! So if you don’t know. Welcome to the club. Prepare to pick up some nifty tips to reducing your unit costs. We also cover negotiating your margins and some know-how around fill rates in the industry. This is also highlighting some of the epic fails that Remi persevered through to get the brand where it is today stocked on the shelves of Sephora, asos, revolve and the likes. Remi is the entrepreneur we all need to learn from. She is a solid 10 out of 10.

Freck Beauty is a clean beauty brand inspired by Remi's hunt for a perfect freckle. During her years of R&D on what ultimately became the world's first freckle cosmetic, FRECK OG, she found that there wasn’t a bold beauty brand that represented everything from “moisturizer-and-go” to “blue-flame-eyeliner-energy."

After launching with FRECK OG in 2017, which quickly took the internet by storm, Remi connected with Des Wilson - now the company's COO. Together, Remi and Des have since expanded Freck Beauty into skincare with the Cactus Collection, and color cosmetics with the CHEEKSLIME range.

Please note, this transcript has been copy pasted without the lovely touch of a human editor. Please expect some typos!


Yeah, totally. Um well thanks everybody for having me and thanks for the listeners, Thanks for doing so I am Remi. I'm the founder and CEO of Freck Beauty. I am born in Seattle and my wife is just, I wish there was a better story for this but I have always wanted freckles and so fresh beauty came into the world as the hunt for the perfect freckle. We came, we launched as one skew and the brand was just called freak and the product was called freak, that was it.

00:05:11 And it was a very unconventional way to do it. And it is the world's first um freckle. And since then we've grown into clean beauty, clean skin care. Um and recently launched its Sephora, Oh my gosh, how fun! It's so funny. Like the that notion of like, you always want what you can't have. Like I'm obviously someone with freckles and I am like going to the place being like, hey, can you like even out my pigmentation? I know, yeah, it's crazy. I love it. Yeah, when when I launched, um I launched first with the Kickstarter and it was like, Frankly it was in 2015 and I think it was before the industry was ready to embrace, you know, natural beauty and quote, I'm air quoting if you're listening, air quoting flaws or you know, skin texture and all that stuff. And this was at a time when, you know, hyperpigmentation, laser treatments, like all that stuff was really at the top of its game in 2015. And as well as, you know, heavy, full coverage foundation was still the thing, like glossy, I think just launched.

00:06:15 So like no makeup makeup was like starting to trickle in, but I don't think the industry was ready yet. So when we launched the Kickstarter, I was, it was unsuccessful. It failed publicly, which was really embarrassing obviously, but also I got kind of dragged for this idea, everyone was like who wants freckles, it's crazy like Nylon, a bunch of big publications that I really looked up to and respected were like this is what is this crazy girl doing. So it's really awesome to see where the industry is now and people like yourself embracing our freckles totally. Why did, why did the Kickstarter fail? What do you think went wrong about it in hindsight? I think it was too much money. Our goal was $215,000 which like has been done on Kickstarter, you know they're kick starters that have made millions of dollars. But they, I think the trick if you're launching on Kickstarter, one of the tricks that I would have taken away from that um is to set your goal as low as possible and maybe at the same time have some like if you're able to do a friends and family around or maybe like you know if this is a proof of concept and people are interested in it, maybe I can get some funding to back it up.

00:07:24 But you know once you do a Kickstarter, if you are successful, you have to fulfill all of the orders that your backers make. So I think that the amount of money was too high, I think that it was a little bit too early. I think that the other thing about Kickstarter is if you were raised like $22,000 like right out the gate. But then I think after a couple of days if your Kickstarter hasn't fund like funded almost immediately, people don't want the responsibility of like checking their bank account to make sure their money got back, you know? So I think that in reality the lifespan of a Kickstarter is like a couple of days so you really have to prepare for that and I didn't, I really had no idea what I was doing. I was kind of like firing at the hip. So I was looking at it like I had 30 days to reach the finish line when in reality it's very short span of time because like the algorithm will kick in and by the way, by the, by the sounds of it and kind of like promote you on their own website and that kind of thing to keep that momentum going I assume. Yeah, the algorithm and then I think just like consumer behavior, they don't want to put their card in and check if, because the money gets withdrawn from your bank account as the backer as a consumer.

00:08:33 Um, and then if the Kickstarter doesn't find, it gets returned to you. So that whole process I think is something a little bit clunky about Kickstarter itself, which is something that maybe they've addressed since then, I don't know, but thankfully it didn't fund. That sucks so much because 22,000 is like, it's not nothing a great amount of money. Yeah, but still good. Like it gives you like that confidence of like, wow, you know, I still got $22,000 here and it's such a sad like, moment to be like, you know, and then, and then poof it goes away, you're like, it sucks. But So should you have set the goal is like 10,000 or 20,000 so that you would have like definitely got there and then going from there. Yeah, well I think it's, I think it's a two edged sword, right? You need to have the amount of money to fulfill your manufacturing needs um which I really, really thankful that the Kickstarter didn't actually work because the product that I was trying to launch with, while it was the same concept of giving you, you know, long wear faux freckles, it was not the right product and I ended up pivoting and simplifying so much that by the time I went to actually launch, I only had to get 15 grand, so that's the other part of it, wow, okay, so so I could have done it, but with the product that I would, if I had launched that product and had to fulfill all those backers orders for for that freckle kit.

00:09:56 I don't think the business would have been successful. So actually was really like uh it's a great thing that happened even though blessing. It was a huge blessing, but you know, and then also all the publicity that came out of getting dragged. Like they literally jimmy Kimmel took the Kickstarter video and did like a two minute spot on his show live, talking about freckles and then like grandma comes out and he's got his freckles on and jimmy is like, what do you think about your freckles? And Gamma was like, I like them. And jimmy was like, I don't know. Um it was like a whole thing. So, but that was also a blessing, even though it was definitely a little bit of a little bit of a stab because then people started following us on instagram. So when we finally launch, you know, we kind of had a little bit of a network already built in so long story short, it was a rough couple of first years. Yeah, that sounds bloody rough. For one. Uh Oh my God. And does that mean like your opinion on all press is good press kind of thing is like correct or what, what do you think? What's your approach on that now?

00:10:59 Um I don't know, I think, yeah, all press is good press, but I don't think about press so much to be honest. Like I really, um, you know, I'm such a like weird talker, I definitely go in circles, so thanks for keeping up. But the part I didn't say about my elevator pitch of myself, you know, I think every founder has a really beautiful and unique story about how they get to the point like the precipice of their business and why they started and everyone's is unique and wonderful. But I think you hear a lot of this story where people were in the beauty industry specifically within beauty, I'm not sure about other industries, They were in beauty, they saw a hole in the market or like they have a personal relationship with clean or something like that. Um For me, I was actually an interior designer and I was working like three full time jobs. I was doing designed for designer, I was doing freelance for my own clients and then I was also working sales to actually make money to pay for a frank at the end there, I was working three jobs, but when I started I was just an interior designer and the genesis for frank is really product driven.

00:12:08 Like I just really wanted freckles. If you look at my drawings from when I was a child growing up in Seattle without any freckles, like the sun has freckles, the plants have freckles and I just love Rickles was so cute now that I live in L. A. I have a couple freckles also because I, as I'm getting older and I have, you know, some hormonal stuff going on. I have melisma now, so my pigment is has changed, but I always, I never had freckles and I always really wanted them. But yeah, so really the why of freckles? Super product driven and brand driven now. But in the very, very beginning it was just like, I really just want freckles and I knew that my like close knit group of girlfriends and guy friends to in East L. A. Were, we're kind of like, yeah, I would wear freckles and so that kind of gave me the confidence to like kick it off. And I love that because I think it's like sends the message that yeah, you can have a really niche idea and just start with that one thing that you want and your friends want that isn't this kind of like mass thing, but then grow it into products that can be really for everyone and add to it.

00:13:14 But like, you can start with, you know, something that is a bit more niche to get going. Yeah, I love it. I mean it's hard because people don't understand it, but it's definitely, it's fun and it's totally doable. What year are we talking when the Kickstarter kind of thing goes to shit, jimmy Kimmel stuff is all happening. When when are we talking So that I started working on development in 2014, End of 2015 was the Kickstarter and then I took a little, took some time off to rest after the Kickstarter and like, I think three or four months later, I kind of picked myself up by my bootstraps because obviously that's embarrassing, right? Like you're just kind of like a little bit wounded after that. Uh, and I got back to it, found new manufacturers, new lives with different and lower minimum order quantities And kind of started again completely with a totally different manufacturer and then officially launched the brand in March or May.

00:14:16 I always get them mixed up 2018. So it took another year to kind of like pick it back up and move it and see where it finally came into its final form, which is still the same product that you see today for refugee. Got it, got it, got it. Okay. And so for the second time around, I always love to ask about the money stuff. How much did it cost you to launch? What did you need to invest? And in the scenario where the Kickstarter failed, How did you then fund that in the beginning? Yeah. So I'll go like quickly over this and then you can let me know like where you want to go because I can I can literally talk about investing for like and what not to do and investing for like an hour. So when I hear the what not to do for show, I know, right? So I from the Kickstarter, right? Because I got so much publicity. This man, I was introduced to this man who had a background in consulting for businesses and just advising like marketing consultant, but just generally like, you know, helping businesses get off the ground and he came to me and he was like, I think this is a really good idea, I'm sorry, you're kickstarted and fund.

00:15:22 Um So we got dinner and he was like, I would love to help you. Like, I'm kind of the kind of person where uh external accountability is really good for me because I can like really go too deep into like something that really probably doesn't actually matter, but I get like fixated. Um I have like, I definitely am a PhD and then also have like hyper focus issues to um so it's really great to have somebody to kind of check in once we like, how's it going? What's like, what's up? He ended up introducing me to his brother, excuse me, who had was very, very well off and a fast food chain in southern California. So he was doing very well and he had passed on beauty blender. Beauter butter had come to him in the early days and asked him to invest in the past on it. So I was like really trying to get into the beauty space as an investor. So he ended up investing $15,000 in the company, which was enough for the first round of production and I gave them and like, everybody listening is going to just jump out of their seat.

00:16:31 I gave the investor for 15 1 $5000.10 percent of my company And the other brother for like a finder's fee another 10%. So I gave away 20% of my company For $15,000 without any sort of vesting structure or anything. Um and it just like really was not the right fit. The launch was successful, but like the relationship between us kind of soured because I wasn't able to put in enough time to really grow the business and I had like I said, I had three full time jobs. I was literally working one job to support frank as well. And so I ended up buying them out at the end of 2018, which is the year that we launched um and regaining full control of the company going into 2019, which was really special and I spent every single dollar that I had in the French bank account and in my personal bank account to get them out because I was like on principle, I was just like, I have to like if this fails, like I wanted to fail, like I wanted, I wanted to be mine and I want to make sure that I'm able to do everything that I feel like I can in order to make this project successful.

00:17:42 But also at this point as I was going into 2019 remember having this moment where I was sitting outside one of my jobs. I was just like dead tired. I had woken up at six in the morning to pack up orders, dropping a post office and get to my job by nine and I was sitting in the parking lot, I had parked my car and I just remember like putting my head against the head rest and just be like, and then just be like, you know what I mean, I'm gonna give you six months, you get six more months because I've done all of this up and down up and down, you know, the Kickstarter funding all that, you know, it takes money to build out a Kickstarter, then getting back up and having to buy these investors out and just, you know, it was it was pretty emotional and so I was like, you know, I'm gonna give you six more months and then if that doesn't work like you do and go hard, do everything that you can um as a completely unseasoned business owner who had no idea what I was doing at the time, um you get six more months and then after that, you got to like walk away because you can't put your entire life on hold for this concept. Um and that that moment really was one she kicked off for me and things that are already kind of like doing, you know, you're generating sales and stuff at this point, right?

00:18:50 Like you're shipping orders, like people are interested in what you're buying, you've already got the community from the previous thing. So what was kind of like furthering the spread of the word and like what changed in that six months that allowed you to keep going and decide like yeah, this is on, I'm doing this. Yeah. Yeah, totally. So the other thing, so we had this crazy spike of sales when we first launched and that was all people who you know, basically I think our instagram was like four or 5000 people who had stuck around for and like can you imagine the brand loyalty of somebody to stick around for two years waiting for some like mystery product to launch. Um and I would just get messages on instagram like once a couple of times a week being like where do you have any like back stock of your products, anything that you can send me? So that really helped me keep going. Right. So I'm literally so thankful for the community that first like couple 1000 people. But we had a great like first launch day. The product is free kogi is about like half the size of your pinky.

00:19:54 It's maybe the smallest cosmetic product in the, in the world. I would venture to guess and that's the full size version but it lasts a really long time. Like I've never actually personally run out of a tube of refugee. So obviously we had this great first hit. But then I had no no like focus on marketing because I was so focused on fulfilling orders and trying to figure out like operationally supply and demand planning, like placing new orders, like making sure that we don't run out of inventory stuff like that. So after the first spike with pretty much no interest or not interested, no time to focus on marketing. It tethered. And I remember there were days where I was like So excited that we hit like $90 in sales on our website, like that's how small potatoes it was from the launch in March or May until the end of the year is like $30-90 in sales a day, you know? But what happened in the six months that I think really escalated the business is I had this kick in my own, but where I was like, okay, so you've done all of this, you've already like publicly failed enough times where it's like just go balls to the walls, like do everything that you think might work.

00:21:07 Like throw the spaghetti at the wall, see what sticks. So I started reaching out to influencers and this is again 2019, it was a different kind of space, influencers had, uh not really figured out like how valuable they were at the time. So I, and I didn't and I didn't either. And so I reached out to a couple and I was just like, I really love your creativity and I would love to send you some products like with no attachment to it whatsoever. And they're like, oh yeah, I would love to kind of see about your brand and this one girl who I will forever be indebted to did it give away like I sent her to and she on her own, her name is Sarah on the internet on her own. She was like, I'm going to give away with frank, go follow freak and you're like entered to win one of their freckle pens. Um, and we like grew 3000 followers overnight and I was like, Okay, so marketing, wow, like it was like that. And then from there, like it just kind of started trying to think outside the box and outside of what educate myself and start listening to the podcast and all of the things I did everything not only externally like, like consumer facing, but also to educate myself and grow and learn a little bit from the beautiful community that already exists on the internet.

00:22:17 Like what, what, what were the other things? Oh, um, let's see. Like for anyone listening, who's an entrepreneur probably in that like solo Preneurs space where there in that, you know, trying to figure it out. I need a throw spaghetti at a wall, what would you recommend? Yeah. Well, okay, you have to think about right now. It's a different climate than it was back then, but I would dive deep, deep, deep in the Tiktok, like I wouldn't even mess around on instagram. Honestly, I would just go tick tock and find, um, find your specific thing. I actually was just recently in a meeting with Tiktok because I'm trying to figure it out for myself. Um, and they're like, be super specific about what you're talking about, especially if you're a brand. So like you could literally go on every single day and like say it's free koji that I'm talking about on Tiktok. I could go on every single day and talk about freckles and be super and like freckles and brought blush and do the same thing every single day and some of the videos hit and some of them don't, you have to be super authentic and like unfiltered and you have to drive the same like same products, same point in over and over again.

00:23:26 And that's how you can build a really great audience on Tiktok. And then, um, from there, you can obviously branch out in the kind of content that you're creating. But as far as like kicking yourself off on Tiktok, it's better to say super focused or that's at least wet and Tiktok told me good old and Tiktok, I know I actually met her for the first time because we had a, at a launch event perfect beauty And it was just so fun to meet people in person. Like finally, after all of this craziness and covid. But the other thing about Tiktok that is what fred has experienced so far. So we're just starting trying to build out our own audience on Tiktok and that's important. But even more important than your own page on Tiktok is other people talking about you on Tiktok and as a brand that is way more valuable than your own page because it's like authenticity, it's, you know, those are the videos that are more likely gonna get viral because it's, that's what people are looking for on Tiktok. It's like they don't really want to hear from brand.

00:24:29 And of course you can have great huge gains on Tiktok as a brand that can happen, but it's easier to get your foot in the door by gift. Like honestly, the same things that I just talked about for instagram, but now it's Tiktok got it, got it, got it. And what else? Oh, the other thing I would say, like if I were to go back to myself in the, in those critical six months, I actually brought in a business partner as well. Um, and she's my ceo and head of sales. Her name is Dez Wilson. She's also my best friend and already was my best friend and I'm the godparents her baby, like we're so close, which probably probably was kind of a crazy decision to make. But again, I was just trying to figure it out her background was in um, distribution for wholesale fashion. She ran a showroom and I already knew her work and respected her so much. And she again, like the accountability of us together was really helpful for me as a person and I think just like, you know, know yourself, know how you work best for sure. But also we were able to kind of like divide and conquer and I was able to kind of give her some of those like supply and demand issues and keeping things in stock and making sure that things are moving along.

00:25:40 Meanwhile she's trying to grow our our distribution in europe because I knew that we had a strong audience in UK and that allowed me to free up some time to focus more on marketing initiatives. So, um, I don't think everybody needs to get a partner right out the gate. It definitely can be done without one. But I had learned everything that I had learned from those investors. I then was like, okay, five year, best schedule, like you know, all of those things. And how did you like value the business at that point then? Because obviously first time around you've given away 20%. Which what does that equal? Like 50 grand or 50? 50 something 1015 15? No, what is it? Oh, evaluation is like, I see, I see minimal, right? Yeah, it's like 45 good. Yeah. Where is this time around you? A are probably well versed in negotiation. You know what not to do, but it's a friend and someone that you truly care about and you want to entice them into the business and make it worthwhile. So how did you find a number and if you're happy to share, what did you land on? Yeah, totally. No, no, no, it does.

00:26:43Edit If you're listening, I hope you're ok with this. Uh so she kind of came in, she came in strong, she was like, well that's taking 46, you know, it was like I was thinking not that, so um but you also have to like backing it up, you know, again we're making like $60 a day in sales. She was getting X percent of nothing. Like it was, it was an idea, a potential of a business and she had actually followed the brand um before we knew each other from the Kickstarter day. So she was very, you know, she knew like kind of wear that she could see the little nugget and she was like, I'd be down to like figure this out with you. Um So what we ended up landing on, if she was not my friend, I think I would have offered her 10% but because she is my friend and again like, you know, yeah, 10% of nothing. Like it was a lot of sweat equity, like it was a lot of sweat for the equity and it was unpaid. Um So we landed on 20% vested over five years and we didn't start paying ourselves, We were both working are separate jobs.

00:27:49 Um, so she came full time and was able to finally leave her positions at the end of 2019, I think beginning of 2019. Sorry. Yeah, so that's how we ended up and with a deal like that for someone who is essentially in the distribution side. So sales, are they or not necessarily her, but in general, Are they incentivized by the commission structure as well as or is it just like the 20%? And that's it. It's a great question. We did not structure it that way. I also didn't want to structure it that way because for me it's not about going and plugging us into every single little small boutique and silver lake, it's about the key players and getting the right partners because running wholesale business is really expensive, like paying for somebody to pack it up even if it's like, um, someone who's big but not that big, like I won't say the name, but one of the retailers that we work with, we realized that we almost were making no money because of how intensely you have to pack out the order.

00:28:57 You know, it's like bottom label poly bag, stick it another polly back then you need to put 50 into a case count poly bag that then pack it up. It's like every single retailer has a different, it's called a rounded guy. So every single person has a different routing guide, you have to have somebody who knows how to pack all that out, it's super expensive, it's super time consuming, and then also you have to think about what's your margin with your retailers, so um that we we realized that later, but in the beginning I didn't want to structure her based on commission because I was like every single dollar needs to go back into the business to grow it. So frankly if you're looking at this like a commission structure, like you're not going to be the partner for me, because this is this is not a one year, let's make some cash, this is like 5, 10 year long play, and then let's make some cash. Yeah, 100%. That's so interesting about the routing guide, I haven't heard that term before. Um I don't know if that's just beauty or if that's across the board. Uh and you're also in so many cool retailers, like all the all the cool ones I think I saw like urban outfitters, Sephora blah blah blah, all the great ones um when it comes to that kind of thing, what else can you share that entrepreneurs might not know about when it comes to that kind of like nitty gritty logistics and operations side of things?

00:30:16 Mhm. Okay. Oh and my other question around that was, did you have to change your pricing because you realize the margins and the additional expense to like pack everything and all that kind of stuff? Yeah. Um well, okay, so first off, the first thing that I would absolutely tell anybody is that the margin is negotiable, so you can go back to revolve and say, okay, so they're like, we want to pay, you know, uh 45 like our margins 55 you can go back and be like, that's really not gonna work for us, we're a small business, you know, our price point is accessible. We like to keep it accessible, we need, you know, a 50% margin, whatever it is. So that first off, I didn't realize that until way later, I had no idea. So if you are like starting to build up your wholesale business, just know that That's a good one. And then I would also recommend when trying to, it kind of, this depends on the size of your team. Right? When when we started building out our wholesale business were literally packing our orders out of my kitchen table and then we didn't get a three pl which is the company that knows all the routing guides and warehouses your product and pass it out for you both for wholesale and DTc until right before we launched with Sephora and that was a year long process to find the right three pl partnership.

00:31:34 So if you're at the stage where you're still packing up your orders, make sure that you get that routing guide and that's across that term is kind of a cross, well at least for fashion and beauty, it's for both. Make sure you get that routing guy and read it and understand the labor that's going to go into it. And if you can even take that on, depending on your team and where and where is, where is your business and where is the best buckets for you to put your are? Oh, I like your time. Is it packing orders or is it building out marketing or like what, what is it? You know, it's always an issue of bandwidth, so get that right and I understand it, read the entire thing and know that while negotiating your margin because that can skew your whole, you know, profitability on a wholesale side, wow, that's crazy. What a good tip and piece of advice for all of us in the early stages of building a business. Holy moly negotiable margins got it when the day comes that you're inevitably uh talking to whole foods or whoever, you know, would be like your dream retail or like that's across I think all industries, but definitely beating fashion and the partnerships that you want to have, like our partnership with Sephora, they have been so wonderful and understanding and it's a partnership, it's not, we're selling you goods, you know, it's a part, there's like any relationship, it's a little bit of flex of compromise.