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Rita’s Water Ice opens more stores, seeks mall deals

By Jill Maunder

Philadelphians love their Italian ices almost as much as their cheese steak sandwiches. Maybe that’s why Rita’s Water Ice was born here. The franchiser, based in suburban Bensalem, Pa., has 348 stores in 12 U.S. states, but its largest concentration of stores remains in the mid-Atlantic. Now, as the chain celebrates its 22nd birthday, a new owner is expanding operations, upgrading existing units and seeking to open about 70 new units up and down the eastern seaboard. Rita’s has even hired a new real estate executive to pursue more mall deals.

Named for its founder’s ex-wife, Rita’s was launched in 1984 by a firefighter as a side business operating out of garage. In 2005 it did $74 million in sales. The chain grew conservatively in the past, but now wants to expand aggressively. “Jim’s goal is to have 1,500 stores by 2010,” said Denise Donlen, Rita’s director of marketing, speaking of CEO Jim Rudolph. Rudolph’s investment company, McKnight Capital Partners, bought Rita’s for an undisclosed sum earlier this year.

The Pittsburgh firm is no stranger to the fast-food sector, having previously owned 47 Wendy’s units. It sold them 10 years ago to Wendy’s International, as well as units of Chuck E. Cheese’s, Baskin-Robbins and Church’s Chicken, Donlen says.

Rita’s plans to penetrate markets where it already has some presence, says Donlen, citing the District of Columbia, Maryland, Ohio and Virginia as key targets, along with Buffalo and Long Island, N.Y. As she puts it, the brand started 2006 with Virginia franchises in only Winchester and Newport News, and now “the whole of Virginia is open to us.” In Ohio, “we want Dayton, more of Columbus, where we have two stores, and Akron.” Although it has a decidedly mid-Atlantic store base, Rita’s has also had recent success with franchises as far south as Hilton Head, S.C., and Florida. Average sales per unit were $244,000 last year — and Rita’s calendar can be as short as a seven-month year, starting no later than March 18 and ending no earlier than the third Sunday in September. After all, there’s not much demand for Italian ice in cold weather.

As part of the chain’s expansion, expect to see Rita’s in more enclosed malls — at least 10 more this year. A recently added real estate manager at company headquarters is dedicated solely to seeking out mall locations, Donlen says. So far, Rita’s has been a tenant in just six enclosed malls, operating kiosks in four of them and in-line units in the others. Its first mall unit opened in 2001 at Ocean County Mall in Toms River, N.J., and the newest mall store opened at Philadelphia’s Franklin Mills in late 2004. At enclosed malls, the company pursues five-year leases with three five-year options, real estate director Jim Pilla says.

A typical mall unit measures 400 square feet, half the size of the average Rita’s. All other units are in neighborhood centers or freestanding buildings, Pilla says.

Those units will be spruced up in the coming months. Some renovations will be as basic as adding some form of seating outdoors or indoors (only two Rita’s have had any seats) as well as more parking spaces and walk-up windows per unit. All of the planned improvements were the result of comments made by customers participating in focus groups or voicing suggestions to franchisees. Some of the lessons learned: Customers are devoted to the brand, calling their local outlets “my Rita’s.” They also dislike waiting in long lines and favor mango and cherry-flavored ices.

“Consumers think of Rita’s as very clean,” Donlen said, citing market research showing positive customer reactions to the brand’s white walls and red-and-white checkerboard floors. The target customer is female, between 25 and 54 years old. Usually, the customer paying the bill — it averages $4.34 — is a mother with a child or two in tow. “More than 53 percent of the brand’s sales are impulse buys,” said Donlen. “That’s why it’s important to have curb appeal.”

Also a consideration for Rita’s franchisees venturing into malls is the fact that lease rules require year-round operation. However, seasonality is already changing a good deal on its own, with an increasing number of units starting the year in January or February and continuing operations through October, says Donlen.

Prospective franchisees usually know Rita’s well because most have been customers or are friends of customers. Before the company started advertising, it received 3,500 franchisee inquiries annually.

Recently, the company has started promotions on Web sites popular with franchisees and through “discovery days” staged for prospects at hotels in desired markets. For example, in February Rita’s executives made such appearances in cities in Florida, Maryland, Ohio, Pennsylvania, Virginia and West Virginia.

Franchisees should expect to invest between $164,000 and $340,000. They receive the required equipment for a Rita’s store and enroll in a training program that can last up to 10 days. Six days are spent at the headquarters’ training center, with additional training and assistance provided during a store’s first two to four days of operation.

Don’t confuse Rita’s products with shaved ice or snow cones, Donlen says. “Our product is so different from a snow cone,” she said. “The flavor is mixed through our product. It’s made fresh on-site every day, and we only keep it on-site for 36 hours. We have times, every 30 minutes, when they have to pump the product so the juice doesn’t fall to the bottom of the container from which an ice will be scooped.”

And for customers who can’t get to a Rita’s as often as they’d like, the retailer added a new product last year: Rita’s Squeezers — a prepackaged version of the popular ices, which come six to a box. In addition to being on hand in freezers at each Rita’s, Donlen says, Squeezers now are stocked at 700 supermarkets.