Do you remember when…
Your Little League baseball team went to Dairy Queen after a big game or tournament?
You and your date shared a banana split or chocolate sundae at another ice cream franchise after watching a movie?
U.S. President Barack Obama has no trouble recalling one time when he took his date for ice cream, although there was no official word on whether they shared a sundae or they sipped from the same milkshake. It was an evening in 1989, and he was a 27-year-old Harvard law student working one summer at a Chicago firm. She was a 25-year-old attorney from the firm.
“On our first date, I treated her to the finest ice cream Baskin-Robbins had to offer, our dinner table doubling as the curb,” Obama has recalled. “I kissed her, and it tasted like chocolate.”
Obama’s date that night was with his future wife Michelle. The Baskin-Robbins moments were part of the motivation for filmmaker Richard Tanne’s decision to make a movie, Southside With You, which recreates the Obamas’ first time out together.
Author Robert Inman based a novel, Dairy Queen Days, on a summer when a troubled 16-year-old boy, Trout Moseley, worked at a local DQ, which his father Joe Pike calls ”a sort of religious experience,” since ”the taste of a spoonful of ice cream sliding down your throat is good for the soul.”
Former syndicated columnist Bob Greene published a collection of his columns in a book entitled Chevrolet Summers, Dairy Queen Nights, using the title to shed light on life in America.
“It often seems to me that what we all may be searching for are these elusive Chevrolet summers and Dairy Queen nights we once knew and that once, at least in memory, made us and our country feel fine and special and right,” Greene wrote in the foreword.
Warren Buffett Likes Ice Cream
People get sentimental about ice cream shops and, in turn, ice cream franchises. Count billionaire Warren Buffett among them. He eats ice cream on a regular basis – often for breakfast – and visits multiple DQ outlets.
For many years, his multi-faceted holding company, Berkshire Hathaway, has owned Dairy Queen International, the franchisor for DQ outlets, which are 99-percent franchised. Compared to some of Buffett’s other businesses, Dairy Queen does not make that much money, because most of the corporate revenues come from fees and royalties.
But Dairy Queen International still generated $169.7 million in revenue in 2014, the last full year for which results are available. That total spelled a three percent increase from a year earlier, and net income rose 7.3 percent year-over-year to $49.8 million.
So, simple reasoning suggests that, if Buffett is involved, chances of success are good. After all, he is a conservative (i.e. buy-and-hold) investor and usually knows growth opportunities when he sees them.
And, he does not appear to have much trouble convincing others about opportunities for success.
There are more than 4,400 Dairy Queen outlets in the U.S. and 6,500 worldwide. In other words, plenty of Americans still get nostalgic about ice cream – and people in other countries do, too.
Other Players in Ice Cream Franchising Game
Along with nostalgia, history, business experience and brand recognition have had a lot to do with the success of Baskin-Robbins and Dairy Queen franchises, which have both operated for several decades. But other players are also finding success in the ice cream franchising game.
Two which stand out are Cold Stone Creamery and Carvel. Cold Stone, which has nearly 1,000 franchises in the U.S. and another 300 worldwide, tries to set itself apart from the competition by making its ice cream fresh daily in stores. Meanwhile, Carvel, which focuses on soft and hand-dipped ice cream products, has more than 400 franchised and food service locations.
Choice Now on the Menu
In essence, ice cream is a simple product that can be dressed up in many ways. Mix in a couple of different flavors here, some chocolate chips, nuts or sprinkles there, and you have a unique dessert. That’s a good thing because these days – nostalgic stories about bygone visits aside – ice cream shop customers want choice.
As is the case with Chipotle, fast-casual pizza chains, and hamburger franchises like McDonald’s and Wendy’s, ice cream outlets are emphasizing variety – i.e. different menu options – as they allow their customers to concoct different ice cream masterpieces, with or without the help of an attendant.
Dairy Queen likely deserves credit for being the first major ice cream franchise to offer product customization when it introduced the Blizzard, a super-thick, soft ice cream shake, in 1985.
Blizzard buyers have the option of mixing in a multitude of items ranging from chocolate bars to cookies.
“The choice is yours!” the invisible announcer said simply in a 1985 DQ television commercial promoting the launch of the Blizzard, probably not realizing that he was helping to spark a trend that has transcended multiple franchises and food items.
Blizzard of Choices
According to the company’s website, DQ sold 175 million Blizzards in 1985. Back then, Dairy Queen officials credited the creation of the Blizzard to St. Louis-area DQ franchise holder Samuel Temperato. But Temperato told The New York Times in 1986 that the credit should go to Ted Drewes, Jr., also of St. Louis, who had “survived the onslaught of Dairy Queens by just selling frozen custard.”
Drewes invented a product that he dubbed Concrete – a name used subsequently by Culver’s for one of its products. But unlike the Blizzard, Drewes’ Concrete was blended without milk. Regardless, it’s doubtful that any franchisor offered customization on such a massive scale before Dairy Queen.
Miscalculation Might Have Cost Millions
As for Drewes, he appeared to miss out on a potential sales windfall by refusing to “throw candy in ice cream” as Blizzard customers do.
“I don’t see the value,” he told The New York Times.
The miscalculation might have cost him millions – but today’s franchisees are not making the same mistake.
Expanding on a practice established many years ago, some ice cream franchises are also peddling a wide assortment of packaged products like ice cream bars, cakes and cookies, among other items, that can be consumed at home or on the go.
Accordingly, ice cream shops are not just about ice cream anymore. One might argue that was true decades ago, considering that Dairy Queen started serving its Brazier items – namely burgers, fries and onion rings – in the late 1950s. DQ subsequently incorporated GrillBurgers, pizza, chicken strips and chicken salad, but the chain has started exploring its wild side.
In 2015, Dairy Queen introduced a new menu containing hot snacks and sandwiches, including warm fudge-stuffed cookies and chicken-bacon sandwiches, turkey BLTs and three chicken melts. Bloomberg noted that DQ is taking a deeper dive into fast-food fare while trying to take some of the cold out of winter.
Customers Not Complaining
But those nostalgia-heavy customers do not seem to be complaining.
Dairy Queen CEO John Gainor told Bloomberg the hot desserts and artisan-style sandwiches – which are part of the chain’s biggest menu overhaul in its 75-plus-year history – resulted in same-store sales growth in September and October 2015.
“The sandwiches are doing especially well,” he said. “It is driving incremental traffic.”
Bad East Coast weather in recent weeks and a February cold snap in other parts of the country – and extreme competition among various food franchises – might hurt quarterly results. But Dairy Queen’s moves will put pressure on competitors to change, prompting rival franchisors and, in turn franchisees, to revise their menus and operations.
Change Carries a Price
These changes could come at a hefty price for existing and new franchisees. If Dairy Queen is any indication, existing players will likely be required to purchase new equipment worth thousands of dollars, and new franchisees could be subject to higher startup costs in order to incorporate new equipment and other expenses related to the changes.
According to Bloomberg, Dairy Queen’s franchisees had to buy two TurboChef ovens to bake the sandwiches, brownies, cookies and apple tarts, with the average investment totaling $6,000 to $8,000. Meanwhile, staples like the brownie earthquake sundae, French silk pie Blizzard and waffle bowls, were discontinued to make room for the new menu items.
“They’re moving away from being that soft-serve ice cream place,” Joel Cohen, owner of Cohen Restaurant Marketing Group in Raleigh, N.C., told Bloomberg. “They’ve got to increase sales and they’re doing what everyone else is doing, and that’s extending their product line.”
Start of a Trend?
Some franchise operators draw the line on merging ice cream with yogurt sales. For instance, Dairy Queen discontinued frozen yogurt (fro-yo) offerings in 2001, citing low demand.
But in what could be a deal to watch as a potential trendsetter, Kahala Brands, which operates Cold Stone Creamery, acquired the Pinkberry frozen yogurt chain in December 2015. It will be interesting to see whether Kahala attempts to incorporate Pinkberry products into Cold Stone outlets and, in turn, Cold Stone items find their way into Pinkberry stores.
Such a move would allow Kahala to achieve larger economies of scale. Kahala might also be tempted to combine Cold Stone and Pinkberry franchises into one store. The company has already moved Planet Smoothie and Tasti D-Lite franchises, which emphasize healthy dessert items, into one store concept.
Going forward, it will also be interesting to see whether Kahala tries to ramp up the effort to merge more ice cream products, other fast-food items and entire franchise brands. Kahala would have several options given that it is also the franchisor for TacoTime, Blimpie sub shops, Samurai Sam’s Teriyaki Grill, and Great Steak, among others, as well as its own coffee shop brand.
Undoubtedly, Kahala will at least consider its options and assess franchisees’ interests in uniting diverse franchise brands and products into one concept.
Meanwhile, Baskin-Robbins describes itself as both an ice cream and fro-yo franchisor, although its seasonal vanilla pomegranate frozen yogurt parfait is the only fro-yo product that appears to get any serious promotion. The fro-yo mentions appear to be made in consideration of health-conscious customers who will likely put more pressure on ice cream franchises to offer more nutritional items instead of products with sugar-laden and fatty ingredients.
However, Baskin-Robbins’ attempt to link to fro-yo was also, undoubtedly, designed to counter competition from frozen yogurt franchises.
Yogurt Franchises Seek Their Own Path
For the most part, fro-yo chains have displayed a preference not to associate their products or businesses with ice cream as they carve their own, albeit smaller, niche in the marketplace.
In addition to Pinkberry, fro-yo franchises making recent headway include Orange Leaf, Yogurtland and Red Mango. As with their ice cream franchise counterparts, fro-yo operators are also keen on offering customers plenty of choice, including gluten-free, kosher-certified and dairy-free options, as well as soft-serve Greek yogurt, sorbets and gelatos, and a seemingly endless array of toppings.
As blogger Chelsea Sepa noted on Frozenyogurtsolutions.com in 2013, fro-yo franchise operators are also doing their best to support good, sustainable causes.
“Many stores are becoming more environment-conscious by using biodegradable cups, cornstarch spoons, and partnering with organizations or initiatives that benefit the community through use of a portion of their revenue. The old-fashioned ice cream parlor décor is being ditched and reinvented into a fresh, modern, and sophisticated hybrid of the perfect college hangout and ideal spot for a casual business meeting.”
These collegiate-like settings comprise two main varieties of stores: Outlets where the yogurt is dispensed and served by employees and self-serve establishments where customers serve themselves as they choose and, just like at a butcher or coffee beans shop, pay prices based on weight.
According to Franchisehelp.com, frozen yogurt franchises rake in $1 billion dollars annually and Americans consume 121 million servings per year.
“Frozen yogurt franchises are also constantly tinkering with and adding new flavors to give customers more reasons to come back,” states the Franchisehelp.com website.
Fro-yo Franchises Enjoying Renaissance
Fro-yo franchises commenced operations in the 1970s but, after a brief spurt in the 1980s, customers were reluctant to come back, likely because the product – a more traditional yogurt – literally left a bland taste in their mouths. Ice cream shops also pushed back by offering products with lower fat content.
These days, many industry observers view fro-yo as making a comeback due to the introduction of a more tart fro-yo product, customers’ desire for healthier alternatives to ice cream, and increased emphasis on customer choice – particularly the self-serve outlets. In contrast, other observers view the fro-yo franchise market as oversaturated.
Either way, there seems to be little doubt that today’s top fro-yo franchisors are smarter and have more staying power than their predecessors. That could spell better opportunities for entrepreneurs contemplating fro-yo franchise acquisitions and will likely spell better support in the form of franchisee training and business development.
In some cases, prospective fro-yo franchisees can expect to pay less than they would for an ice cream shop. According to Entrepreneur, a Dairy Queen requires an initial investment of $356,000 to $1.8 million, compared to an investment of $223,000 to $428,000 to start up an Orange Leaf fro-yo franchise. On the other hand, a Yogurtland franchise requires an initial investment of $307,000 to $700,000, and a new Pinkberry franchise goes for $311,000 to $615,000.
Incidentally, Baskin-Robbins, while mixing the ice cream and fro-yo franchisor description, requires an initial investment of $90,000 to $396,000.
Entrepreneurs Have Other Options
Other frozen dessert franchises are giving entrepreneurs more options to choose from, including Kona Ice, Rita’s Italian Ice, CREAM and Popbar. These relative newcomers offer unique cool treats like shaved ice, cream ice (billed as a smoother version of ice cream) and handcrafted gelato on a stick.
In the meantime, the newcomers are taking pages out of traditional ice cream and fro-yo franchises playbooks by offering healthy ingredients and more typical fare, including increasingly common cookie sandwiches.
And, true to ice cream shop form, the newbies are hyping in-store experiences in an apparent bid to evoke nostalgia.
Baskin-Robbins Continues to Embrace Change
Baskin-Robbins celebrated its 70th birthday in 2015, but the world’s largest ice cream shop chain never gets tired of expanding or innovating.
It continues to expand in its home state of California with concentrated efforts to grow in Los Angeles, where the first store opened in 1945, and San Diego. In a bid to make things easier for prospective franchisees, Baskin-Robbins has also launched a new development strategy featuring ready-to-operate shops.
The chain has announced plans to develop a new 1,000-square-foot shop in the proposed Breakwater Town Center in Imperial Beach, Calif., which will serve as a template for future turnkey outlets. By purchasing a new ready-to-go outlet, a first-time franchisee can skip the site-selection and development phase and get down to business sooner.
It will be interesting to see whether Baskin-Robbins has sparked a trend that other ice cream franchisors adopt.
Dairy Queen Goes Digital
People often think of a visit to Dairy Queen, which is now in its 77th year of existence, as a journey back in time – but the ice cream chain has taken a big step to be more futuristic.
In January 2016, franchisor American Dairy Queen, which is owned by billionaire Warren Buffett, chose Cineplex Digital Media as the endorsed provider of in-store digital merchandising solutions for the DQ system in the U.S. and Canada.
“Broadening our digital merchandising initiatives is a key strategic priority for us,” said Janna Rider, director of digital merchandising for American Dairy Queen in a news release. “It was imperative to our brand that we select a business partner that will address not only the present requirements but also provide innovative, integrated digital solutions that meet the expectations of our future ‘fans,’ while supporting the needs of our franchisee community.”
According to the news release, DQ will be using Cineplex Digital Media’s proprietary content management system software to manage its digital menu board networks. The CMS will enable franchisees to manage in-store digital marketing programs from a single access point, giving them maximum flexibility and more control, says the news release.
Some observers might find the deal ironic, considering that Buffett is known for preferring life’s simple things.
He bought American Dairy Queen for $585 million in 1998 from a family that needed cash to deal with the former owner’s estate issues. Buffett was a regular at the DQ in Omaha, Nebraska, where his holding company Berkshire Hathaway is based.
“We have put our money where our mouth is,” he said following the acquisition.
Cold Stone Mixes Old Idea With New Tastes
Cold Stone Creamery’s founders built the chain by taking an old idea and making it better – but the current owner is not willing to stand pat on taste.
In January 2016, Kahala Brands appointed Maya Warren as the company tastemaster and food scientist for portfolio brands Cold Stone and Pinkberry frozen yogurt.
A news release states that in her role with Kahala, Warren will promote new flavors as well as customer favorites.
“I love talking to people about ice cream and frozen yogurt — their eyes light up! And I love the science behind the microstructure and what makes it taste so good, especially Cold Stone Creamery ice cream and Pinkberry frozen yogurt,” Warren said in the release. “We will make a great team when it comes to promoting frozen treats and continuing the tradition of putting out amazing product lines and profiles that appeal to our guests worldwide.”
Co-founders Donald and Susan Sutherland launched Cold Stone in Tempe, Ariz., in 1988 after searching in vain for a form of ice cream that was smooth and creamy rather than hard-packed or soft-serve. Cold Stone, which merged with Kahala in 2007, derives its name from a granite slab which is chilled to 16 degrees Fahrenheit and used to mix candies, nuts, cookies and other sweet ingredients into ice cream.
The method has been used before, and add-ins are widely credited to Steve Herrell, founder of Steve’s Ice Cream of Somerville, Mass., who reportedly first used them in 1973.
The difference, arguably, with Cold Stone is that it has taken the concept, which is predicated on the staple of today’s franchising sector – customer choice – and ran with it while creating new store locations. Cold Stone has grown from that first shop in Tempe to nearly 1,300 locations in the U.S. and more than 25 other countries.
Carvel’s Struggles Prompt Questions
Can Carvel take the express lane back to franchising success?
It’s evident that Carvel is looking to grow mainly through smaller “express” ice cream shops in high-traffic areas rather than full-service outlets. Although the chain is 80 years old and enjoyed considerable early success under founder Tom Carvel, it has operated through franchises mainly in the U.S. Northeast and Florida.
A map on Carvel’s website shows that it is only developing full-service shops in its core regions and express outlets in many other states. Carvel is shying away from putting full-service shops in California, which has a history of ice cream franchise success, but is highly competitive; and the chain has decided to steer clear of Nevada, which has year-round heat and high traffic in Las Vegas – two factors that are conducive to ice cream franchising growth.
The chain has suffered a large decline in franchise units over the years, and franchisees have criticized management for selling large volumes of ice cream in supermarkets. Several franchisees have struggled financially, and it remains to be seen whether Carvel, now owned by Roark Capital, can resonate with fickle customers.
As a result, a new question has also arisen: Is Carvel an ice cream franchising firm or a grocery-store supplier?
Orange Leaf Embraces Modern Franchising Staples
Nobody can accuse Orange Leaf CEO Reese Travis of dreaming small.
Travis, a former Orange Leaf franchisee who purchased the frozen yogurt chain with Mike Liddell in 2010 and moved its headquarters to Oklahoma City from San Francisco, where it was founded in 2008, is charting an expansion course that aims to have 1,000 stores in place by 2020.
Orange Leaf, which was previously known as Orange Tree, has more than 300 stores in the U.S. and says another 125 are coming soon while it also plans more international expansion after already moving into Australia.
Frozen yogurt has taken a thumping at times in its competition with ice cream and other fast-food products, but Travis and his cohorts, including president Jeff Goodman, a former Cicis Pizza vice-president, are clearly banking on the prevailing themes of modern franchising – customer choice, sustainability, and corporate social responsibility – to get them to the promised land.
“There are a couple other self-serve concepts and some full-serve yogurt shops, but we have embraced our model,” Reese, a former University of Oklahoma football player, told Food Service Equipment and Supplies magazine. “Customers can get exactly what they want and make the yogurt how they want it.”
When Travis and Liddell purchased the chain, it had 15 stores, but the number exploded as the ownership group inked a long-term partnership deal with Oklahoma City Thunder star Kevin Durant, who holds an equity interest in the firm, and launched other marketing efforts.
Those efforts include an extensive social media program, which is making Orange Leaf stand out in a frozen dessert franchising segment that is largely characterized by long-standing chains like Dairy Queen and Baskin-Robbins. Several notable franchising awards are also helping.
In 2015, Orange Leaf ranked on the Inc. 5000 list as one of the fastest-growing private companies in America for the second consecutive year. Entrepreneur ranked Orange Leaf #125 in its Franchise 500 list for 2016.
In other words, Orange Leaf will be a franchise to watch as fro-yo attempts to earn its niche as a healthier alternative to ice cream.
Yogurtland Slows Down After Co-founders’ Plans Change
Phillip Chang was all set to move on from his daily dedication to frozen yogurt franchising.
Then he changed his mind.
He and his wife Michelle, who co-founded Yogurtland with him in Irvine, Calif., in 2006, had launched efforts to move to their native South Korea in 2014. Chang’s mother had already moved to South Korea as part of their relocation and the couple’s teenage daughter was enrolled in school.
The Changs planned to do humanitarian work while leaving Yogurtland’s operations in the hands of others. When he stepped down as CEO in early 2014 while retaining control of the company, Yogurtland was the largest fro-yo chain in the U.S. with 270 stores worldwide and on track for 500 locations by 2015, according to The Orange County Register.
But the Changs did not like the new direction of the chain, after growing it from their bubble-tea café in Irvine, which also sold frozen yogurt. In Chang’s view, the company was no longer providing workers with the positive environment established at its founding.
Although he claimed his return “wasn’t about the numbers,” average sales for all domestic stores in June 2014 had dropped 13 percent from a year earlier.
So he returned to helm the company at mid-year 2014 and revamped Yogurtland’s head-office team.
“We changed almost 60 percent (of employees) from then to now,” he told The Orange County Register, noting he gave employees advice as to how they could improve – and severance pay.
And, he decided to slow down on expansion, even though a report by IBISWorld, estimated Yogurtland’s revenue growth from company-owned and franchised stores at an average annual rate of 24.7 percent to $211 million from 2010 to 2015.
“How we get there is more important than getting there,” Chang told The Orange County Register.
Pinkberry Begins New Era Under Kahala
When people discuss the renaissance of the fro-yo franchising movement, Pinkberry’s name comes up.
And, Michael Serruya noticed.
In December 2015, Serruya’s family-owned Kahala Brands, which also owns Cold Stone Creamery and other frozen dessert and quick-service food brands, purchased Pinkberry, launching a new era for the decade-old chain.
“The Pinkberry brand is known worldwide for its super-premium frozen yogurt and truly is the concept that reignited the frozen yogurt category a decade ago,” Serruya, Kahala’s chairman and CEO, said in a news release. “Pinkberry has a history of exceptional growth in just 10 years because of the product quality, flavor profile and personality of the concept.”
Pinkberry was founded in 2005 in West Hollywood, Calif., by Shelly Hwang and Young Lee before they married. (Lee, who left the company in 2010, was sentenced to a maximum of seven years in prison in 2014 for beating a homeless person who had displayed a stick-form tattoo of a couple having sex.)
Pinkberry has compiled more than 270 stores worldwide and is credited with being the first to introduce tart-tasting frozen yogurt that has become common. The chain has seen some stores close in recent years, but the Kahala takeover is tantalizing given that Serruya and his brother Aaron launched Canadian frozen yogurt franchisor Yogen Fruz.
Hence, they are unlikely to let Pinkberry get caught in the weeds while developing a total of 18 brands, including Blimpie and recently acquired Planet Smoothie, Tasti D-Lite and Maui Wowi. Serruya’s extensive experience with Yogen Fruz, which he and Aaron launched in 1986 when they were 20 and 19, respectively, also bodes well for the future of Pinkberry.
“We’ve been around the frozen dessert sector for 30-plus years,” Michael Serruya told QSR magazine. “It’s the only sector my brother and I know. It’s what we do. We love it. It’s in our veins.”
Red Mango Expands Choices to Other Food Products
Frozen yogurt franchise operators are known for being dedicated – some might say obsessed with – the core product.
But Red Mango could be bucking a trend as an era of fro-yo franchise consolidation, indicated by Kahala Brands’ takeover of Pinkberry, shows signs of emerging. Red Mango, founded in Los Angeles in 2007 by young entrepreneur Daniel Kim, wants to be about more than yogurt.
Now a portfolio company of BRIX Holdings based in Dallas and with more than 280 locations around the world, Red Mango bills itself as a rapidly expanding retailer of all-natural frozen yogurt, light foods, and fresh-pressed, ice-filtered juices. It has also incorporated Smoothie and Juice Bar into its name and, in addition to serving the aforementioned products, also offers sandwiches and salads under 500 calories.
While some of the fro-yo offerings are typically tart, others are sweet and creamy and come with a variety of fruit, nuts and other toppings, indicating that Red Mango wants to differentiate itself from its main competitor, Pinkberry.
Entrepreneur indicates that Red Mango store numbers have climbed steadily since Kim launched the chain and, as the U.S. economy recovers, the outlook for more growth appears positive.
Menchie’s Still in Expansion Mode
Renaissance or no more renaissance?
That is the question surrounding the frozen yogurt franchising sector. Some people say the re-birth is still on. Others say it’s over.
Menchie’s company leaders fall into the first group. To prove its claim, Menchie’s, which was founded in 2007 and commenced franchising in 2008, is still expanding aggressively, if not as quickly as before. The world’s fastest-growing fro-yo chain opened its 500th store, in Saratoga Springs, N.Y., in 2015.
Although Menchie’s appeared to fall short of its goal of reaching 600 units by year-end 2015, it is still getting around. In February 2016, Menchie’s opened a new location in North Marketplace of Patriot Place in the Boston area, and 2015 openings ranged from Seacaucus, N.J. to the Phoenix area.
Menchie’s is led by thirtysomething CEO Amit Kleinberger, a former Israeli soldier who lives in the L.A. area and assumed the helm from company founders Danna and Adam Caldwell in 2008.
The chain’s outlets offer self-serve frozen yogurt in 100 rotating flavors, including low-carb, no-sugar added, dairy-free, nonfat, gluten-free and kosher options. The yogurt is produced from the company’s cows based in California, which do not receive any artificial growth hormones.
In addition to providing healthy menu options, Menchie’s has started offering such popular mix-ins as Oreo cookies, Butterfinger chocolate bars, Cinnabon treats and Reese’s peanut butter cups. Menchie’s has also introduced a number of fro-yo cakes.
Kona Shaved Ice Thrives While Supporting Charities
Tony Lamb did not have a big dream about striking it rich as a franchise operator – but his chain’s success is setting an example for others.
Lamb is the founder of Kona Ice which markets franchise trucks that serve up ice shavings or thinly crushed ice with increasingly nutritious ingredients. The chain also offers shaved ice carts, kiosks and trailers to franchisees, who partner with schools, sports teams, youth groups and other community organizations for fundraising.
In January, the company announced that it has raised more than $35 million for charitable causes since its inception. The company’s business has done well, too, selling approximately 700 franchises since its trucks started rolling in 2007 after a year of planning.
“I’ve always been just blown away when we get national recognition,” Lamb told The North Kentucky Tribune. “In 2014, Entrepreneur magazine had just told us that we were the No. 1 new franchise in the United States. When we announced it at the convention, the place went crazy, because it was validation for the franchise owners, and that’s when (the success) really hit me.”
Lamb, a former marketing consultant, only got into the shaved-ice franchising business because his daughter had a bad experience with an ice cream truck and he didn’t like being away from his wife Susie and their four kids for long stretches. But Kona, which launched in 2007 and began franchising in 2008, has flourished under his leadership.
Lamb established a training college that offers Web and social media training for franchisees and, in early 2016, acquired an Austin, Tex.-based flavoring company that aims to make the shaved ice more nutritious for the thousands of children served.
“The thing that really has my interest right now is how culturally, we are moving toward a nutrition-based product,” Lamb told The North Kentucky Tribune. “When we started, we were a dessert truck, some would say a sugar truck, and I used to say it’s not hard to sell sugar to kids – but you can’t say that anymore.”
Rita’s Italian Ice Strives to Be Natural
Rita’s Italian Ice has joined the list of frozen dessert franchises that are looking to become more nutrition-oriented. In January 2016, the Trevose, Pa.-based chain launched a new Italian ice product line made with natural ingredients.
But, contrary to what some skeptics might expect, the move was not done out of desperation. According to Entrepreneur, Rita’s franchise units have increased steadily since 2011. The chain now operates around 600 stores in the U.S., is developing 100 stores in Hawaii, Washington, Idaho and California, and plans to grow in Canada and the Middle East.
In addition to its namesake product, Rita’s sells old-fashioned frozen custard, layered gelati, a blended Misto shake and Blendini, which mixes Italian ice, frozen custard and a topping, along with milkshakes made with old-fashioned frozen custard, frozen drinks and custard cookie sandwiches.
Rita’s was launched by Bob Tumolo, a former firefighter who opened his first Italian ice store, named after his wife, in Bensalem, Pa., in 1984. The chain was sold to private-equity group McKnight Capital Partners in 2005, and investment firm Falconhead Capital LLC acquired a controlling interest in 2011.
The bottom line? Expect more expansion from Rita’s.
CREAM Founders Triumph Over Hardship
CREAM does not fit one’s typical definition of an ice cream franchise – presuming one exists – but there is not much doubt about this chain’s success.
The growth commenced with a single store in the San Francisco area in 2010 after the husband-and-wife team of Jimmy and Wafa Shamieh looked for ways to rebound from the recession following struggles with their grocery and deli businesses.
When the Shamiehs noticed that neighborhood kids were mixing Wafa’s oven-baked cookies with her home-made ice cream and customizing the treats with marshmallows and candies, a new business idea was born. Working with their son Gus and daughter Tagreed, the Shamiehs opened their first store in an 800 square-foot-location near the University of California, Berkeley.
Now, CREAM – the acronym for Cookies Rule Everything Around Me – is developing franchises rapidly, and the Shamiehs plan to help franchisees open 60 to 100 locations in coming years. According to a CREAM news release, the firm opened 13 new shops in 2015, doubling its growth from the previous year.
To help foster growth, the Shamiehs plan to keep the cookies priced below $3 and also manage real estate costs carefully. In addition to the customized cookies, CREAM is offering plenty of other choices, including multi-flavored ice cream; mini-cookies; ice cream cones; milkshakes, malts and floats; brownies and coffee-based treats. The chain is also attempting to appeal to health-conscious customers by offering gluten-free and vegan cookies.
“To me, it’s fascinating how a labor of love or a hobby can turn into the next great thing,” CREAM president and COO Jim Ryan told Entrepreneur.