Fall 2007 Hot Franchises 2007

Guide to Cart and Kiosk Franchises

Welcome to Specialty Retail Report’s second annual “Guide to Cart & Kiosk Franchises,” where you’ll find the details on more than two dozen cart- and kiosk-based franchises as you plan your specialty retail strategies for 2008.

There are a number of cart- and kiosk-based franchises out there for specialty retailers who want to be in business for themselves but also want the support of a franchisor who knows its product inside-out and understands the most-effective way to sell the product for maximum profitability.

Some of the franchises in this year’s Guide are new, launched by small start-ups. Blue Heron Bags, is offering its franchise for the first time this fall (pending regulatory approval) and Cereality, in business since 2003, is in the midst of rolling out its nationwide franchise program. Others are well established and growing, such as Maui Wowi Hawaiian Coffees & Smoothies, with 498 of 500 locations run by franchisees, or Liberty Tax Service, with more than 2,300 seasonal franchisee locations.

There are more than 2,500 franchise concepts in the US, according to the International Franchise Association, a Washington-based organization that offers resources to the franchise community. And the number is growing, with 900 new concepts introduced since 2003. The fastest growing category? Specialty fast food and ethnic food, so it’s no surprise that some of the concepts in our Guide are food-related. Franchising now contributes more than $1.5 trillion to the economy, and is also the source of jobs for more than 18 million Americans, according to the IFA.

Buying into a system

imageBuying a franchise is a great way to get started because you can buy into a proven retail system and gain access to specific company secrets, business processes and selling strategies. If you meet the franchisor’s financial requirements, follow precise directions and dedicate yourself to success, franchising just may be the right opportunity for you.

Cart and kiosk franchisees get in-depth franchisor support, minus the expensive overhead of a larger “traditional” store. However, not all franchisors offer the same level of franchisee support, which typically includes in-person training (usually at the company’s headquarters), site-selection assistance and marketing support. Nor do they require the same financial investment. And all have varying levels of expertise in working with franchisees. So investigate each franchise offer thoroughly before you invest (see “Before You Buy” sidebar).

Of course, having a passion for the product is a big plus. Your enthusiasm for what you sell will go a long way in growing sales and building a loyal repeat-customer base.

Success by the spoonful

Cereality is a concept sure to please the cereal-loving crowd. Available as full cafés and kiosks, Cereality provides an outlet where customers can choose from dozens of brand name hot and cold cereals, more than 40 different toppings and a variety of milks (including soy and lactose-free) to make their own perfect breakfast—any time of day. Customers also can order proprietary parfaits, cereal bars, granolas and smoothies. For those in a rush, the company offers leak-proof to-go containers that resemble Chinese carryout cartons, complete with spoons that double as straws for milk-slurping purposes, called “sloops.”

imageStaff “Cereologists” wear pajamas, and famous brand-name cereal logos take center stage in a “home kitchen atmosphere.” Last year Cereality was awarded the “Experience Stager of the Year” award, or EXPY, presented by Joe Pine and Jim Gilmore, authors of the best-selling book, “The Experience Economy.”

The concept is already a hit in Newark Liberty International Airport in New Jersey, with another slated to open soon in Kennedy Airport in New York. The company also has locations in or near college campuses in Arizona, Pennsylvania and South Carolina. Going forward, Cereality hopes to create a nationwide network of franchisees in airports, universities, hotels, resorts, theme parks and healthcare facilities, among other locations. The company has received more than 7,000 inquiries from potential franchisees in the past year. “It’s a young brand,” says spokesman Kevin Donnellan. “Cereal is loved by young and old, and eaten any time of day.”

In addition to field support to help franchisees get off the ground, the company also offers eight to 10 days of training at its Arizona headquarters, assistance with location selection, and marketing help to increase sales.

In July, Cereality was purchased by Scottsdale, Arizona-based Kahala-Cold Stone, which owns more than a dozen restaurant brands including Blimpie, Cold Stone Creamery, and Ranch1. What does that mean for potential Cereality franchisees? Expertise in supporting and growing the brand, Donnellan says.

Still brewing up sales

If cereal is not your thing, there’s still plenty of growth in the coffee cart and kiosk market. Specialty coffee retail sales topped $12 billion in 2006, up from $8.4 billion five years ago, according to the Specialty Coffee Association of American (www.scaa.org). There are 3,600 coffee kiosks and 2,900 coffee carts in the US, the Association says. Cart and kiosk sales combined were almost $1.5 billion in 2006, up from $1.3 billion a year earlier. The average kiosk pulls in $300,000 in annual sales; the average cart, $140,000.

Cuppy’s Coffee, Smoothies & More, based in Pensacola, Florida is expecting significant growth in the cart and kiosk franchise market. Cuppy’s started franchising in 2006, and currently has 14 kiosks and two carts. Kiosks are ideal for malls and college campuses, and carts are well suited for hotel lobbies, says Rachel Clark, Cuppy’s vice president of marketing. Cuppy’s is actively working with malls and other shopping centers to find qualified franchisees as part of an aggressive growth strategy.

Part of the company’s growth strategy is focused on adding new menu items regularly. “We are always looking to increase revenue streams for our franchisees,” by adding new menu items, including breakfast, lunch and snack foods, Clark says. The company rolls out new limited-time-only smoothie flavors every six-to-eight weeks, featuring summer fruit blends in July and August, and pumpkin pie flavors in October.

Cuppy’s in-house real estate department helps franchisees find quality locations that meet specific demographic criteria, including high foot-traffic counts and high-caliber neighboring stores, Clark says.

Fashion is in the bag

imagePotential franchisees more interested in fashion than food can explore Annapolis, Maryland-based Blue Heron Bags, which at press time was awaiting state approval to franchise.

The kiosk-based company stocks designer handbags and totes in a range of styles and price points. The kiosks offer monogramming services, available in 30 minutes, enabling customers to purchase on impulse a gift that “appears [as if] they thought about it,” says Amy E. Brown, the company’s president.

Though the franchise is in the final stages of formation, the company itself has been around for more than 15 years and enjoys a healthy repeat-customer base, says Brown. She joined the firm in 2004, took over the retail side of the company in February and pursued franchising because so many entrepreneurs had asked about the possibility of opening a Blue Heron Bags franchises. “It’s a great business for the right person,” she says. The ideal franchisee “loves the product and is a go-getter—sales oriented and organized.”

The company offers customized software with templates to make monogramming easy, Brown says, adding: “If I can do it, you can do it.” In addition to five days of training, the company plans to provide on-site support during the franchisee’s first week of business and ongoing 24/7 monogramming support through its monogram equipment vendor. An online forum also will be available to connect franchisees with company management.

Blue Heron Bags also offers monogram services for products it doesn’t sell, including sports team shirts and jackets, T-shirts, etc. Though there is no 30-minute guarantee for the service, “It’s a positive feature and brings in an extra source of income,” she says. The service also helps build brand recognition.

Benefits and drawbacks

imageFranchises offer franchisees significant benefits such as name recognition, bulk-purchasing power, training and management expertise, but there are drawbacks, too. Franchisees must be willing to operate under the confines of a franchise agreement that spells out specifically how the business is to be run. Those looking to take a concept and “make it their own” might not make the best franchisees.

The most successful franchisees are self-motivated entrepreneurs who are willing to work within the confines of a pre-established business model. The first step, then, is thoroughly investigating that business model before buying in.

Visit company headquarters. Understand every aspect of the company’s Uniform Franchise Offering Circular (UFOC).Talk with past and current franchisees. Get to know the franchisor. In short, be sure to do your due diligence—before you sign on the dotted line.

Before You Buy

The Federal Trade Commission (www.ftc.gov) suggests several additional sources of information to help you investigate a franchisor thoroughly before you invest. In addition to carefully evaluating the franchisors disclosure documents, including the Uniform Franchise Offering Circular (UFOC), and speaking with current and former franchisees, the FTC suggests speaking with:

Your accountant.
Investing in a franchise is costly. An accountant can help you understand the company’s financial statements, develop a business plan, and assess any earnings projections and the assumptions upon which they are based. An accountant can help you pick a franchise system that is best suited to your investment resources and your goals.

Your lawyer.
Franchise contracts are usually long and complex. A contract problem that arises after you have signed the contract may be impossible or very expensive to fix. A lawyer will help you understand your obligations under the contract, so you will not be surprised later. Choose a lawyer who is experienced in franchise matters. It is best to rely upon your own lawyer or accountant, rather than those of the franchisor.

Your banker.
Your banker can give you an unbiased view of the franchise opportunity you are considering. Your banker should be able to get a Dun & Bradstreet report or similar reports on the franchisor.

The Better Business Bureau.
Check with your local Better Business Bureau (www.bbb.org) in the cities where the franchisor has its headquarters. Find out if anyone has complained about the company’s products, services or personnel.

Government agencies.
Several states regulate the sale of franchises. Check with your state Division of Securities or Office of Attorney General for more information about your rights as a franchise owner in your state.

A-D Companies

Auction It Today, Inc. (105 locations-104 run by franchisees)
eBay drop-off store
Kiosks in All 50 States
Franchise Fee: $19,000
Add’l Costs:  $20,000-$50,000
Royalties: 4%
John Hoose, Brighton, MI, 810.225.0555

Blue Heron Bags* (2 locations-0 run by franchisees)
Personalized designer handbags and totes
Kiosks in All 50 States
Franchise Fee: $30,000
Add’l Costs:  $70,000-$153,000
Royalties: 5%
Amy Brown, Annapolis, MD, 443.766.8022

Candy Bouquet (840 locations-840 run by franchisees)
Floral-like designer gifts and gourmet confections
Kiosks in All 50 States
Franchise Fee: $3,900-$31,000
Add’l Costs:  $6,020-$21,380
Royalties: None
Little Rock, AR, 877.CANDY.01

Cereality (4 locations-2 run by franchisees)
Hot and cold cereals, smoothies and coffees
Kiosks in All 50 States
Franchise Fee: $7,500
Add’l Costs:  $35,000-$40,000
Royalties: 6%
Staci Segal, Scottsdale, AZ, 480.362.4207

Coffee Expressions (2 locations-2 run by franchisees)
Gourmet coffees, Italian gelato decadant desserts
Carts/Kiosks in the South
Franchise Fee: $22,500
Add’l Costs:  $60,000-$325,000
Royalties: 5.5%
Jeanna Kish, Waco, TX, 254.776.2507

Color Me Beautiful, Inc. (60 locations-60 run by franchisees)
Cosmetics, skin care and color analysis
Carts/Kiosks in All 50 States
Franchise Fee: $8,000
Add’l Costs:  $500-$1,500
Royalties: None
Analia Lane, Manassas, VA, 703.471.6400

CrepeMaker, Inc. (13 locations-9 run by franchisees)
Handheld entrée and dessert crepes
Kiosks in All 50 States
Franchise Fee: $25,000
Add’l Costs:  $80,000-$150,000
Royalties: 6%
Neysa Smith, Palmetto Bay, FL, 866.4.CREPES

Cuppy’s Coffee, Smoothies & More (34 locations-34 run by franchisees)
Specialty coffees, smoothies and more
Carts/Kiosks in All 50 States
Franchise Fee: $2,500-$10,000
Add’l Costs:  $17,450-$49,750
Royalties: 3%
Rich DeMerchant, Ft. Walton Beach, FL, 888.241.4324

Dippin’ Dots Franchising, Inc. (303 locations-300 run by franchisees)
Dippin’ Dots ice cream, yogurts and ices
Carts/Kiosks in All 50 States
Franchise Fee: $12,500
Add’l Costs:  $67,928-$222,750
Royalties: 4%
Dee Helm, Paducah, KY, 270.575.6990

G-P Companies

GolfAhoy Golf & Cruise Travel Bureau (1 locations-1 run by franchisees)
Golf tourism and cruise travel agency
Carts/Kiosks in All 50 States
Franchise Fee: $31,100
Add’l Costs: $30,000
Royalties: 3%
Anthony Webber, Edmonton, Alberta, Can., 877.415.5442

Great American Cookies (281 locations-281 run by franchisees)
Cookies and cookie cakes
Kiosks in All 50 States
Franchise Fee: $30,000
Add’l Costs: $110,000-$170,000
Royalties: 6%
Vanessa Hepworth, Salt Lake City, UT, 801.736.5954

Guard-A-Kid (77 locations-77 run by franchisees)
Child identification and safety products
Carts/Kiosks in All 50 States
Franchise Fee: $19,900
Add’l Costs: $750-$1,000
Royalties: None
Hossein Kasmai, Miami, FL, 305.477.3301

Liberty Tax Service (2411 locations-2348 run by franchisees)
Computerized and online individual tax preparation
Kiosks in All 50 States
Franchise Fee: $17,000-$33,800
Add’l Costs: $33,800-$63,900
Royalties: 14%
Steve Lepkowski, Virginia Beach, VA, 800.790.3763

Maui Wowi Hawaiian Coffees & Smoothies (500 locations-498 run by franchisees)
Hawaiian coffees, espresso, snacks and smoothies
Carts/Kiosks in All 50 States
Franchise Fee: $27,500
Add’l Costs: $45,000-$250,000
Royalties: 0 to 6%
Kera Vo, Greenwood Village, CO , 877.849.6992

Mrs. Fields (508 locations-508 run by franchisees)
Oven-fresh cookies and brownies
Kiosks in All 50 States
Franchise Fee: $30,000
Add’l Costs: $110,000-$170,000
Royalties: 6%
Vanessa Hepworth, Salt Lake City, UT, 801.736.5954

Nicolati’s Coffee House (0 locations-0 run by franchisees)
Gourmet coffee products
Carts/Kiosks in All 50 States
Franchise Fee: $12,500
Add’l Costs: $34,750-$53,500
Royalties: 6%
Franchise Dept., Miramar, FL, 954.874.2917

Pretzelmaker (193 locations-193 run by franchisees)
Hand-twisted fresh-baked soft pretzels
Kiosks in All 50 States
Franchise Fee: $25,000
Add’l Costs: $105,000-$160,000
Royalties: 7%
Franchise Dept., New York, NY, 212.277.1100

Pretzel Time (211 locations-211 run by franchisees)
Hand-twisted fresh-baked soft pretzels
Kiosks in All 50 States
Franchise Fee: $25,000
Add’l Costs: $105,000-$160,000
Royalties: 7%
Franchise Dept., New York, NY, 212.277.1100

R-W Companies

Relax Oasis (3 locations-2 run by franchisees)
Massage services and related products
Kiosks in All 50 States
Franchise Fee: $25,000
Add’l Costs: $75,000+
Royalties: 7%
Marvin Maltz, West Palm Beach, FL, 561.688.1413

Rita’s Water Ice Franchise Company, LLC (470 locations-463 run by franchisees)
Ice custard happiness
Kiosks in Eastern and Southern US
Franchise Fee: $35,000
Add’l Costs: $197,950-$396,800
Royalties: 6.5%
Tom Spadea, Trevose, PA, 800.677.RITA

Showcolate – Fondue Express (4 locations)
Select fruits covered with refined chocolate
Kiosks in All 50 States
Franchise Fee: $27,500
Add’l Costs: $99,500-$155,000
Royalties: 6%
Keith Watts, Waco, TX, 877.757.1445

Sir Chocolate, LLC (4 locations-3 run by franchisees)
Chocolate-dipped fondue treats
Kiosks in All 50 States
Franchise Fee: $25,000
Add’l Costs: $65,000-$89,000
Royalties: 5%
Doug Whittaker, Denver, CO, 303.671.7150

The Coffee Beanery (159 locations-157 run by franchisees)
Specialty coffees, smoothies and bakery goods
Kiosks in All 50 States
Franchise Fee: $27,500
Add’l Costs: $35,000-$100,000
Royalties: 6%
Stacy Peterson, Flushing, MI, 888.385.2326

The Original SoupMan (35 locations-32 run by franchisees)
Gourmet soups, salads and sandwiches
Kiosks in All 50 States
Franchise Fee: $35,000
Add’l Costs: $120,000-$180,000
Royalties: 5%
Steve Gardener, New York, NY, 212.768.7080

We’re Rolling Pretzel Company (55 locations-47 run by franchisees)
Hand-rolled soft pretzels and beverages
Kiosks in All 50 States
Franchise Fee: $15,000
Add’l Costs: $50,000-$100,000
Royalties: 5%
Kevin A. Krabill, Alliance, OH, 888.549.7655