Some people start a small business to pay for the occasional holiday and keep a roof over their head. Others start small with big ambitions. According to Peter Knowles, his business grew by accident.

In 1966, he was a baker working in London and feeling the financial pinch. So he took his father's advice and opened a bakery back home in Durham.

He said: "I had worked in quite a lot of bakeries around the North-East and I was working in baking research prior to coming back to start the business."

With his fiance, Freda, now Mrs Knowles, behind the counter in the shop, Peter's Cathedral Bakers was born.

Oddly, it was lack of turnover that fuelled the first expansion. The first Peter's -then with an apostrophe still attached to the name -was in a new shopping centre with very little passing trade, so Mr Knowles senior's advice was to open a second bakery, and so they did.

Mr Knowles said: "We probably made pretty much what we are doing now, the general bread and savoury products would not be dissimilar to what we produce now.

"After eight or nine months, my father suggested that we needed another bakery. I didn't understand the logic but I did as I was told. We took another bakery, which had a little shop attached to it. We gradually added one or two more shops over the next three years.

"We had about five branches when, under pressure from the environmental health officer, we had to get out of the old bakery and moved into a new bakery in Dragonville. That is when it got really serious.

"We continued to expand almost by accident. We would drive past a shop and see a 'to let' sign and think, 'that would be all right'."

Despite the haphazard nature of the growth, Peter's grew fast and, by the end of the 1970s, the new bakery was not large enough. The company took on a second unit at Dragonville to produce savouries. The weekend in 1981 when they were planning to move, a fire damaged the stores, forcing a more rapid move than had been planned and giving the company a foretaste of things to come.

This setback did not hold the company back for long and within a few years, they were taking on a third Dragonville unit to house the confectionary production.

As Peter's two sons Richard and Chris grew, they learned about the baking trade first-hand. From the age of 12, Chris would help in the shops and, as a 16-year-old school leaver, Richard was certain that was where he wanted to make his career. The involvement of the two sons meant the business was no longer Peter's and the apostrophe was dropped from the name. At about the same time, they moved into a single, purpose-built factory at Dragonville to bring the manufacturing under one roof, but again, they outgrew it and had to build an extension in 1991.

At this stage, expansion was still piecemeal, but in the mid-1990s that changed when Peters took over Harrison's, a Spennymoor bakery, which added 29 shops to the empire.

Mr Knowles said: "It didn't double the sales because they were all very small branches. We had traded all around them and they were a village bakery."

By now, the company had about 70 branches, from Ashington, in Northumberland, to Northallerton, in North Yorkshire.

Things were looking up, with son Richard heading a business development plan that aimed to increase turnover from core growth and new sites, increasing the business by £1m in the first year and £1.2m the second year. He was negotiating a contract with supermarket chain Aldi for another seven-figure sum when disaster struck.

In December 2003, there was a small fire in the factory, from which the company recovered. But there was a second, far more serious fire in April 2004. That fire stopped production and the shops had to close for 31 days.

By a mixture of good fortune and good planning, Richard had a friend from college who had a food production factory and lots of equipment on an industrial estate in Peterlee. The day after the fire, Peters staff arrived, cleaning up and planning to restart production. Twenty-six days after production had been halted, they began baking again and the company's 31 shops were able to re-open.

Peter and Richard are convinced that it was not just luck that enabled the company to come back from the brink. It was strategic planning and customer loyalty built up over 30 years of service. Although some custom was lost and plans had to be put on hold, Richard now addresses conferences on how to rescue businesses from disaster.

Very few companies come back from complete closure, but Peters continues after a rebranding exercise that has modernised its image and helped takings.

There is also a policy of expansion. All of this is happening alongside a new factory development at Dragonville, taking Peters Cathedral Bakers back to the home that has been the seat of its success for 30 years.