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FDD Talk: The Rita’s Italian Ice Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on March 17, 2016

in FDD Talk 2017: Food Franchises, Franchise Earnings, Frozen Dessert Franchise

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Rita's Italian Ice Photo by infinitesmilesx

In this FDD Talk post, you’ll learn the following:

  • Section I – Background information on the Rita’s Italian Ice franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Rita’s Italian Ice franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Rita’s Italian Ice’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 estimated high, low, and average sales for Italian ice, gelati, frozen custard, Misto shakes, and Blendini at franchised Rita’s Italian Ice Shops (top third, middle third, and bottom third) that have been open for at least 1 full season
  • 2014 product percentages (i.e. sales mix) for Italian ice, gelati, frozen custard, Misto shakes, Blendini, and miscellaneous items at franchised Rita’s Italian Ice Shops, as determined from Franchisees’ franchised Shop register tapes
  • 2014 estimated costs of goods sold for franchised Rita’s Italian Ice Shops

Section I – Background Information

Rita’s Italian Ice is an international franchise that sells Italian ice, frozen custard and other specialty creations.

Former firefighter Bob Tumolo founded the company, which he named after his wife, in 1984 in Bensalem, Pa. He began with a recipe he purchased from an elderly neighbor and then modified it to include real fruits.

The business began as a family affair with Tumolo’s mother, Elizabeth, and his brother, John, helping in the store. They created special formulations of Italian ice each day, working to perfect the flavor blends and consistencies and adding chunks of fresh fruit. They ensured freshness by discarding any unsold product after 36 hours.

In 1987, Tumolo opened a second store, and two years later, he decided to franchise his business. In 2005, McKnight Capital Partners, a private equity group, purchased the company, and in 2011, Falconhead Capital purchased a controlling interest in the company.

Today, Rita’s has more than 600 locations in 25 states and in Washington, D.C. The company also operates internationally with restaurants in Canada, China and the Philippines.

Candy-Flavored Ices

Rita’s frequently collaborates with popular candy companies on seasonal flavors. For example, in 2010, Rita’s collaborated with Just Born, Inc. to introduce a seasonal Peeps Brand marshmallow candy-flavored ice.

Rita’s partnered with Cadbury to introduce a Swedish Fish Italian ice flavor in 2009 and then again in 2012, for a Sour Patch Kids Red Italian ice flavor. Other product tie-in flavors have included “Alex’s Lemonade” ice, “Oreo Cookies and Cream” ice, “Jelly Belly” jelly bean ice and “Mint Oreo” cream ice.

A national egg shortage caused Rita’s to suspend serving its popular custards in the summer of 2015.

Rita’s notified customers that it would be replacing that menu item with soft-serve ice cream until egg supplies rebounded. At the time, a company spokesperson estimated that the company served 4,500 gallons of frozen custard per day – requiring 1,600 pounds of egg yolks per day — at its 600 locations.

New All-Natural Line

In January 2016, Rita’s Italian Ice announced the debut of a new all-natural product line. It includes four new flavors: pineapple, strawberry, banana and orange.

Each new flavor is made fresh daily without artificial coloring or artificial flavors. Like the rest of Rita’s product line, the new ices are free of cholesterol, trans fats and gluten.

Since 1992, Rita’s has handed out free Italian ices in honor of the first day of spring. Last year, it reportedly gave away more than 1.2 million cups of Italian ice.

In addition to Italian ice and frozen custard, the chain offers frozen custard cakes, custard cookie sandwiches, layered gelati as well as its Misto® and Blendini® frozen creations.

Rita’s earned the top spot in Nation’s Restaurant News “Consumer Picks 2014” for service and value in the Frozen Treat category and place first among 18-24 year old patrons. Rita’s also was named one of the Top 25 Franchise High Performers by the Wall Street Journal and was #94 on Entrepreneur Magazine’s Franchise 500 list for 2016.

Section II – Estimated Costs

  • Please click here for detailed estimates of Rita’s Italian Ice franchise costs, based on Item 7 of the company’s 2015 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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