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 2020 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Rita’s Italian Ice franchise, based on Items 5 and 6 of the company’s 2020 FDD
- Section IV – Number of franchised and company-owned Rita’s Italian Ice outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of Rita’s Italian Ice’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2019 average, median, highest, and lowest gross sales for the top tier, middle tier, and bottom tier of the 481 Rita’s Italian Ice shops that reported gross sales during the 2019 season
- 2019 product percentages (i.e. sales mix) for Italian Ice, gelati, frozen custard, Misto shakes, Blendini, and miscellaneous items, as a percentage of total systemwide sales
Section I – Background Information
19 Things You Need to Know About the Rita’s Italian Ice Franchise
Postpones 28th Annual First Day of Spring Giveaway for First Time in Company History
1. Each year, Rita’s Italian Ice marks the first day of Spring with a massive giveaway. Rita’s 28th First Day of Spring event was scheduled to take place on March 19, 2020, but due to the rising concerns over the COVID-19 pandemic at the time, Rita’s announced (a few days before the scheduled event) that it would be postponing the annual event.
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3. In an early February press release, Rita’s Italian Ice invited guests to usher in the new season with a taste of Spring that conjures sweet memories for longtime loyalists. The brand truly owns welcoming Springtime and the first day of Spring holds a special place in the hearts of many that have created a tradition of attending the event each year.
4. Since Rita’s guests make joining in on the First Day of Spring at Rita’s a rite of passage, the brand continues to grow its fanbase as more Italian Ice lovers come to experience the one of a kind event that signals the end of a long winter for many.
5. From February 18 to February 25 , Rita’s invited fans to prove their loyalty to the Italian Ice brand by sharing their most extreme and passionate first day of Spring memories, rituals, and stories in Rita’s “First Day of Spring Fanatics” contest. The three most enthusiastic entrants with a supremely spirited tradition would win a dream trip only a true Rita’s fanatic could imagine.
6. The three winners and their guests would travel to Rita’s headquarters for a day of behind the scenes fun. Fanatics could enter the contest in the comments of the contest post located on Rita’s Facebook page by sharing their Rita’s First Day of Spring memories, stories, and traditions. The winner was announced on March 4.
7. Linda Chadwick, president and CEO of Rita’s, said, “Our communities and loyal guests who have enjoyed the tradition year after year are what makes the First Day of Spring special. Almost thirty years into the event, new traditions are being built as guests that have grown up with Rita’s are bringing their children to their local Rita’s to celebrate flavor being in full bloom.”
Fundraising for Alex’s Lemonade Stand Foundation
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9. Founders Jay and Liz Scott started the foundation in honor of their daughter, Alex, who succumbed to neuroblastoma at the age of 8. When Alex was 4, she opened her first lemonade stand to raise money to help other children affected by cancer, and her parents wanted to create a lasting legacy in her memory.
10. Rita’s Italian Ice partnered with Alex’s Lemonade Stand Foundation not long after it was founded in 2006, and Rita’s was one of the foundation’s first large corporate sponsors. To date, Rita’s has raised nearly $5 million for Alex’s Lemonade Stand Foundation.
11. Every year, Rita’s franchisees sell paper lemons in their stores. Guests can donate money, write their name on a lemon, and decorate a Wall of Hope in each store. Some franchise partners take the fundraising further, such as the franchisee who shaves his head when his store reaches its $20,000 fundraising goal for Alex’s.
12. In addition to support for Alex’s Lemonade Stand Foundation, some Rita’s Italian Ice franchisees provide coupons and giveaways to nonprofits, schools, or church groups who need help raising money for their projects.
Company History
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14. Initially, Tumolo was just trying to make some extra income and sell a refreshing treat during hot summer days. However, Tumolo’s cold treats were an instant hit and by 1987, he opened a second store to keep up with demand. Two years later, in 1989, Tumolo started franchising Rita’s.
15. As Rita’s continued to grow around the country, the brand expanded its menu, which now includes frozen custard, sundaes, cream ice, milkshakes, and various concoctions that feature a mix of custard and Italian Ice.
16. After several decades of the Tumolo family running Rita’s Italian Ice, the company was sold in 2005 to McKnight Capital Partners, a private equity group with extensive franchise experience. Under the new ownership, Rita’s expanded further.
17. In 2011, Falconhead Capital purchased a controlling interest in the company from an investment group led by Jim Rudolph. Two years later, Rita’s Italian Ice opened its first international location in China.
18. More recently, in 2017, Argosy Private Equity and MTN Capital acquired a controlling stake in Rita’s from Falconhead Capital. Today, there are Rita’s Italian Ice locations all across the U.S. and a few internationally.
Entrepreneur’s Franchise 500
19. Rita’s Italian Ice did not rank on Entrepreneur’s 2020 Franchise 500 list.
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 2020 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Rita’s Italian Ice’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
Franchised
2017
- Outlets at the Start of the Year: 601
- Outlets at the End of the Year: 591
- Net Change: -10
2018
- Outlets at the Start of the Year: 591
- Outlets at the End of the Year: 565
- Net Change: -26
2019
- Outlets at the Start of the Year: 565
- Outlets at the End of the Year: 564
- Net Change: -1
Company-Owned
2017
- Outlets at the Start of the Year: 0
- Outlets at the End of the Year: 0
- Net Change: 0
2018
- Outlets at the Start of the Year: 0
- Outlets at the End of the Year: 0
- Net Change: 0
2019
- Outlets at the Start of the Year: 0
- Outlets at the End of the Year: 0
- Net Change: 0
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
Part 1 – Reported Gross Sales for Shops Systemwide Open During at Least the 2019 Season
- Part 1 reflects reported Gross Sales data for Shops systemwide that were continuously operating during at least the 2019 Season and reported Gross Sales for the 2019 Season.
- Rita’s Franchise Agreements require all Shops operating under the System to operate during the Season. For 2019, the “Season” was the period starting March 1 and ending September 30. Shops that are Seasonal typically operate only for the Season, and Shops that are Year Around must operate the entire year.
- The reported Gross Sales data in Part 1 includes Gross Sales for both Seasonal and Year Around Shops. The data reflects the Gross Sales for the entire period that each Shop operated in 2019.
- Gross Sales for each Shop includes any sales through Mobile Units and/or Satellites operating under such Shop’s Franchise Agreement. Many System franchisees actively pursue Catering Activities and Mobile Events at a location other than the Shop.
- The reported Gross Sales data in Part 1 includes Catering Activities and Mobile Events for Shops that engage in those opportunities. Franchisees who do not pursue these opportunities may be negatively affected and have less Gross Sales.
- The figures reflected in Part 1 were compiled from unaudited information reported to Rita’s by its franchisees. Rita’s has not independently verified any of the sales information upon which this financial performance representation is based and the information has not been prepared on a basis consistent with generally accepted accounting principles.
- The figures reflected in Part 1 (i) reflect 481 Shops that reported Gross Sales during the 2019 Season (the “Sample”), and (ii) do not include 27 Shops (excluded from the Sample) that operated for the 2019 Season but closed at some point in 2019 or were terminated at some point in 2019 (because such Shops were generally in wind down mode and/or operating with a reduced staff and a product offering limited to their remaining inventory).
- Part 1 divides the Sample into three categories (Top Tier, Middle Tier, and Bottom Tier), based on their Gross Sales as compared with the sales for the 481 total Shops considered in arriving at these figures.
- Each average represents the average Gross Sales for franchisees within each Tier. High sales and low sales represent the franchisee within each Tier that attained the highest and lowest Gross Sales.
Top Tier
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