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When people visit the Smithsonian Institute or other historical museum shops around the country, they may be surprised to find that the classic paper dolls on sale originate in Utah.

It was a `paper chase' that led to New York City and landed the work of Salt Lakers Linda Peck and Marilyn Gandre' in such places as the Smithsonian, the Metropolitan Museum of Art, Disneyworld and locally, Deseret Book. As the result of an idea sketched on paper and presented to the exclusive department stores FAO Schwartz, Marshall Field's, Macy's and Neiman Marcus, Peck and Gandre' became purveyors of paper: not paper tigers or paper roses but paper dolls. Buyers from the Smithsonian saw the dolls later at a trade show and immediately placed their order.What kind of paper doll would the staid Smithsonian go wild over? Paper dolls the likes of which haven't been seen in years - if ever. Traditional fairy tale heroines with porcelain complexions and vividly hued costumes to wear. Enclosed with each paper doll are paper dresses so beautiful that you can almost feel the nap of the smooth velvet and rough edges of the gold braid and embroidery.

Creating elegant clothing and paper dolls comes naturally to Peck and Gandre'. The creators of these lovely dolls were in the business of real children before they started putting fairy tales on paper. Gandre' is mother to six girls; Peck has four girls, four boys and 11 granddaughters.

Peck, who became friends with Gandre' after moving into her neighborhood in 1981, created beautiful porcelain dolls as a hobby. When Gandre' had the idea of producing paper dolls, Peck thought they should fashion the paper dolls after the look of antique porcelain dolls.

A collector's hall of fame of rare porcelain dolls became the inspiration for a series of "baby doll" paper dolls. Peck-Gandre' photographed the Margaret Strong collection in Rochester, N.Y. (the largest doll collection in the world). From these authentic designs came the Steiner, a lovely from the 1880s, the A. Marque (1914), a French doll named the Bru Jne. dating from 1870 and the Hilda Toddler, circa 1914. Peck-Gandre' were also licensed to create the Steiff/Strong bride and groom teddy bear paper dolls.

Their fairy tale paper doll series is called "Enchanted Forest" and features Rapunzel, Beauty and the Beast, Goldilocks and Little Red Riding Hood as well as Cinderella, Sleeping Beauty and Prince Charming.

After Salt Laker Gary Kehl took their artwork to New York City and returned with the first orders in 1983, the dollmakers' husbands, Wayne Peck and Brent Gandre', backed the first few printings and the Peck-Gandre' children pitched in to help with collating and shipping.

Gandre' paints the dolls, and both of them do the clothing. Peck writes a version of the fairy tale after researching the Brothers Grimm and Charles Perrault tales.

Looking back at all they had to learn and do, Peck remarked, "Sometimes it's good not to know what's facing you! But we weren't afraid to ask for help in things we didn't understand, like the marketing." Peck went back to Salt Lake Community College to study graphic design, production and paste-up. "I wanted to know how it's all done," she said. Gandre' added, "We work well together. We have pretty much the same temperament, and we just stuck with it."

The dolls never fail to elicit a nostalgic response. Gandre' recalled the reaction they got at a Los Angeles trade show. "People would walk by, glance at the dolls and after they'd gone a few steps, stop, turn around and say, `Paper dolls! I played with paper dolls!' "

Doll collecting is the No. 2 hobby in the United States after stamp collecting, according to some sources. The classic paper dolls are as sought after as some antique dolls. One Peck-Gandre' line of 20-inch dolls, the Jumeau doll and the Mein Liebling doll, completely sold out and are a hot collector's item.

The story of Peck-Gandre' would be quite remarkable if it ended here.

But there is more.

Almost 30 years ago, the inventor of the Barbie doll sat and observed little girls playing endlessly and contentedly with paper dolls. He concluded that there was a market for a new doll, one that mirrored the sophistication of paper dolls rather than baby dolls (remember paper dolls of movie star RhondaFleming?). These dolls would have a wardrobe in cloth like the paper wardrobes that so fascinated generations of little girls.

The Barbie doll became the world's No. 1 toy, and in commemoration of Barbie's 30th birthday, Mattel decided to create the Nostalgic Barbie Paper Doll. Dolls and paper dolls had come full circle, and that circle includes Salt Lake City.

Mattel saw the paper dolls of Peck and Gandre' at a gift show and contacted the Salt Lake businesswomen to see if they were interested in licensing for the Nostalgic Barbie paper doll. The women won the contract.

Beginning in January 1989 Mattel will launch a $20 million advertising campaign for the 30th anniversary of Barbie. The Peck-Gandre' Barbie will be patterned after the 1959 Barbie, and the clothes will reflect the wardrobe of 1959-64.

Peck-Gandre' classic paper dolls are now found in every state in the nation and Japan, New Zealand, England, France and Puerto Rico. The Nostalgic Barbie will be marketed worldwide. An idea that was sketched out on a piece of paper has become a booming business, and two ladies who once exchanged recipes are now profiled in Business Day. Sounds just like a fairy tale come true.