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Originally published March 26, 2010 at 6:30 PM | Page modified March 26, 2010 at 8:53 PM

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Tom O'Keefe, founder of Tully's Coffee, retiring as chairman in June

Tom O'Keefe remains the largest shareholder of Tully's Coffee stock, owning about 11 percent of a company that has struggled to be profitable in the shadow of Starbucks.

Seattle Times business reporter

Tom O'Keefe, a real-estate developer who founded Tully's Coffee in 1992, will retire June 30 as chairman of Seattle's second-largest coffee company.

"I've worked 24/7 for this company for a long, long time," he said at a shareholder meeting Friday at the Museum of Flight. "Now I believe I am better serving you and I and our interests on the outside as an active shareholder than I can be as a burden on the inside."

He remains the largest shareholder, owning about 11 percent of a company that has struggled to be profitable.

"A founder doesn't stay around when the company needs to stay lean," said O'Keefe, who turns 56 on April 1.

Tully's gets more attention than most companies with fewer than 200 stores and $39 million a year in sales. It gains reflected attention from Starbucks, which has 16,700 stores and $9.8 billion in annual sales.

And, Tully's has about 6,000 investors, many of whom paid around $1 a share during the 1990s to grab a piece of a rapidly growing company that they expected to go public and rival Starbucks.

It never has gone public. The most recent effort came in 2007, but was stymied that August by a languishing stock market.

Tully's sold its coffee roasting and wholesale business for $40.3 million to Green Mountain Coffee Roasters last year and paid off debt that had threatened to capsize the company.

It also led to one of only two profitable years in the company's history. The other came after it sold its Japanese operations.

O'Keefe, whose middle name is Tully, told about 200 shareholders Friday that Tully's future is in its overseas business, and he said after the meeting that a more aggressive franchising program could lead to thousands more U.S. stores.

Tully's has about 185 U.S. stores, plus four in Singapore and two opening next week in South Korea. Hundreds of Tully's stores in Japan are no longer owned by the Seattle company, but O'Keefe said they "act as a huge billboard for us in the balance of Asia."

He has traveled extensively in Asia to find business partners for Tully's, and said in an interview that the company might try to launch an initial public offering (IPO) in Asia.


O'Keefe does not anticipate continuing to work on overseas expansion, even as a consultant. "It's easier for the existing team if there's a clean break," he said.

He regrets raising money from so many shareholders that Tully's has been forced to make securities filings as if it were public, an effort O'Keefe said costs about $1 million a year.

O'Keefe stopped being Tully's CEO in 2001. He plans to continue working in real estate and will devote more time to philanthropic activities.

To shareholders, O'Keefe recounted a story about the night his father died in November 2000, around the time Tully's gave up its first IPO effort.

In his typical wry style, O'Keefe recounted that his father told him he was the best looking of his children, "even if you are carrying 10 pounds more than you should." Then he said, "Protect your shareholders. They gave you their money."

Only a couple shareholders mentioned O'Keefe's retirement during a question-and-answer session. One asked if he would oversee the expansion in Asia, and another said his retirement was "appropriate" but wanted to know if he would return later in some capacity, given how much he has meant to Tully's. O'Keefe did not commit either way.

After the meeting, longtime shareholder John Wolfe, of Poulsbo, said it's a good idea for O'Keefe to let the people he hired run Tully's.

"It shows a lot of class; he's looking out for us and himself," said Wolfe, who is hopeful for an IPO when the stock market is strong enough. "The people in there right now have shown they can turn the company around, with profits up and in-store sales and franchising. It's on the way up."

Although Tully's more than doubled its net loss to $1.4 million in its most recent quarter, net sales rose 11 percent to $10.1 million.

O'Keefe received an 88 percent pay raise to $259,000 in fiscal 2009, according to a securities filing. That included a $50,000 bonus; CEO Carl Pennington Sr. received a $100,000 bonus.

They told shareholders Friday that they have not received salary increases. After the meeting, O'Keefe clarified that there were no salary increases between fiscal 2009 and fiscal 2010, which ends this month. Since last October, O'Keefe's compensation has come from a joint venture formed for overseas expansion that is half owned by Tully's.

For the three months before that, O'Keefe did not receive his salary but was paid directors' fees of $10,000 a quarter plus $1,000 a board meeting and $500 per board committee meeting.

Investors defeated a shareholder proposal that would have limited director fees and terms, filed by Kristopher Galvin, Tully's former chief financial officer. The vote tally will be available in the next few days, a Tully's official said.

Melissa Allison: 206-464-3312 or

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