Franchises and Commercial Real Estate and Ritter's Frozen Custard and Retail Development and Retail

Ritter’s Frozen Custard franchisees reopening stores

January 25, 2011

Ritter’s Frozen Custard, a once-promising locally based chain that struggled to grow too quickly, is enjoying a rebirth of sorts under new ownership.

At least four Ritter’s stores in the Indianapolis area have either opened or are set to reopen in the same locations where Ritter's premium ice cream once was served before previous franchisees left the company.

New York-based TruFoods bought the chain in May 2008 from the Ritter family for an undisclosed price and spent two years revamping the 20-year-old business model in an effort to attract new franchisees. That effort seems to be making headway after an initial struggle that saw several more franchises close.

Hoosiers have been passionate about Ritter’s handmade frozen custard ever since it was launched in Franklin more than 20 years ago. John Ritter and his wife, Bonny, started the company in 1989. At the time, it was a novelty—frozen custard made fresh each day inside a retro-looking circular building that featured only outdoor seating.

The chain boasted 18 locations in 2000. By 2005—its peak—it had 60.

But the company’s former CEO, Saul Lemke, who acquired control in 2003 (with the Ritter family retaining a major stake), was roundly criticized by franchisees for expanding too quickly while neglecting daily operations. An increase in competition in the premium ice cream field didn't help matters.

The Ritter family reacquired control in 2004, installing John’s son Bob as CEO. But the damage had been done. The chain had fallen to about 40 stores in eight states by the time TruFoods bought it.

TruFoods’ recent turnaround attempt prompted a franchisee who operates the Ritter’s at 11640 Brooks School Road in Fishers to open another—on the far-east side where he closed it in 2008. Steve Aguilar reopened his store at 9335 E. Washington St. on Jan. 18. In between, he had converted the building he owns to a Rally’s Hamburgers franchise.

What’s different about his Ritter’s building is it’s rectangular. The attempt by the Ritter family to switch from the traditional round building to the rectangular shape never worked for Aguilar.

“We were the first to go rectangular,” he recalled. “The thought was that it would be more successful. That was wrong.”

The arrangement required too many employees to make the business run efficiently, Aguilar said. He said he's learned from past mistakes and made necessary modifications to operations to make the setup work better.

In addition, Aguilar said he has more confidence in TruFoods' franchising knowledge than he had with previous ownership.

“TruFoods brings a broader perspective to the Ritter’s brand and business because they own three other restaurant concepts,” Aguilar said. “They have a better understanding of what franchising is all about.”

TruFoods specializes in buying and turning around underperforming brands. The company’s other holdings include Arthur Treacher’s Fish & Chips, Pudgie’s Famous Chicken and Wall Street Deli.

Under its ownership, new Ritter's franchisee Mike Rigdon in 2009 reopened a store at 10450 Allisonville Road in Fishers and has plans to do the same to a closed Avon location on U.S. 36 in the spring.

In addition, TruFoods is negotiating to open a Ritter’s where a closed one stands on West 10th Street near Ben Davis High School. A potential franchisee bought the property and has plans to demolish the building and develop a small strip center there, which would be anchored by a Ritter’s.

The strip-mall model illustrates TruFoods’ efforts to branch out from Ritter's traditional, free-standing modular units that can be expensive for a franchisee to purchase and usually are only open seasonally, which can limit sales.

The interest in reopening the Ritter’s locations tells Gary Occhiogrosso, TruFoods chief development officer, that franchisees have confidence in the brand and, perhaps more important, the new ownership.

“It provides some level of validation,” he said. “[Ritter’s is] definitely having a rebirth, that’s for sure.”

TruFoods met its goal of opening four stores by the end of the year, but managed just seven commitments, falling short of its aim of 10.

Besides Aguilar’s store on East Washington Street, others that have opened in the past year are in Richmond; Jersey City, N.J.; and Toledo, Ohio.

Today,  the chain has 31 locations in six states, or about half as many as five years ago. Ritter’s has 17 stores in Indiana, including nine in the Indianapolis area. Other stores are in Florida, Michigan, Ohio, New York and Texas.

Ochiogrosso said the company won’t award franchises simply to increase the number.

A franchisee’s initial investment can be as little as $72,500 for a shop inside an existing restaurant or as high as $750,000 for a free-standing unit, according to TruFoods’ franchise disclosure document filed with the Indiana Secretary of State.

Opening new stores where others have closed may be the best indicator of a turnaround, said Steve Delaney, a principal at Indianapolis-based Sitehawk Retail Real Estate.

"If they weren't confident they certainly wouldn't reopen," he said. "I think it's a good sign."


 





 

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