Rita’s Water Ice Sweetens the Franchise Deal

By Nora Parker

_8Rita's Water Ice started out in 1984 as a tiny business intended to augment founder Bob Tumolo's income as a Philadelphia firefighter. Water ice, also known locally as "Italian ice," is a frozen treat akin to ice cream. In 1989, Tumolo decided to franchise the concept, and when he sold the company in 2005, there were hundreds of Rita's Water Ice stores open in nine states. He sold Rita's to McKnight Capital Partners, a company with extensive franchise experience; the number of franchises continued to grow and stores are now found in 15 states. The plan at this point is to expand the number of stores to 1,500 and double the average sales by 2010.

With expansion plans that aggressive, it was inevitable that Rita's Water Ice would turn to geospatial technology to help plan, manage and grow the network. The company, which had purchased various reports and services from geoVue in the past, recently contracted with geoVue to bring geospatially-based network management tools in-house. Directions Magazine's Nora Parker interviewed Tom Spadea, Rita's director of Franchising and Real Estate, to learn more about the plan and the challenges.

Nora Parker (NP): What was the challenge that needed to be addressed?

Tom Spadea (TS):
The main challenge we have as a franchise company is finding the proper density of stores in any given market. If we have too few stores we are under-serving the market and not getting the brand to the critical mass needed for maximum success. If we overbuild the market and put stores too close to one another it could have an adverse effect by cannibalizing sales of sister stores. As a franchise company this "cannibalization," or encroachment, is a huge issue. By moving forward with geoVue we can get a clearer and more objective view of what will happen to sister stores as we add more stores to a mature market, and where we should be putting the first stores in a new market.

NP: Why was geoVue selected? What other solutions were considered?

We have been a geoVue customer [e.g. accessing their services as opposed to acquiring their products for in-house use] for a number of years for basic demographic data and mapping software. We looked at a handful of other vendors, some very large and some very small, and felt that geoVue was the right size to have the necessary talent on their team, but not so big that we as a client were unimportant. We all feel we made the right decision.

NP: What is geoVue providing? How does it blend with your existing IT and other systems?

We have a custom online portal [built by geoVue] that maps out our entire system and available areas to help us manage our growth. From that system we can run predictive sales reports for any location we are considering for a Rita's [store]. The system outputs clean and simple PDF reports we use with our CRM system. The PDF reports are five page "macro approval reports" that will generate a "pass/fail" decision for a specific address. The first three pages are maps (small, medium and large scale) and the last two pages are numeric reports with demographics, traffic counts, etc. These are viewed via the CRM system by senior management, who give each site approval for further analysis. If an address is approved, then a site visit will take place so that the site's characteristics (traffic, visibility, etc.) can be further analyzed for suitability. The system has proved [to be] an invaluable piece of our decision making process, of whether or not we approve specific real estate locations. It has streamlined our process of evaluating new areas to target our growth. It is the creator of our data and we have integrated it into other systems such as our "public" online opportunities maps.

NP: Are there any results yet? Any proven return on investment?

We just started [using the system in-house] in the 4th quarter of 2006 so it is still too early to tell. Putting aside the obvious metrics of the time the system saves us, the streamlined evaluation of real estate and the other tangible advantages, the real value of geoVue is as a tool for better decision making.

Over time, the system will also improve with our feedback of what is working and what is not working. It becomes a powerful and unique tool and really differentiates us from our competition. The uniqueness of any brand and retail concept makes a tool like this a necessary part of doing business. To not use a tool like this is like working without a Web site. Can you be in business? Sure. But are you really a company that understands what is going on in the marketplace? The true ROI on geoVue will be in profitable locations and happy franchisees, which is a far greater economic return than the investment in time and money into the system.

NP: What are the lessons learned?

I joined the project late, and if I was running it from the beginning I would have spent more time on what we wanted the deliverables and reports to look like at the end and then worked backward to build the system. Integrating the actually users of the system, in our case the real estate managers in the field, earlier in the project could have saved some time.

NP: What are the next steps?

TS: The project will never end, which is the power of the system. Now that we have a baseline and are getting real predictions out of the system we will track how accurate the predictions are and continually make course adjustments. As the year ends we will load in the sales data on our stores, and also we are working on a numerical evaluation of both site characteristics and operator characteristics to help the system do a better job of predicting success using a neutral baseline "typical" store front and franchisee.

For instance, we [may] have a perfect partner doing everything right everyday - who markets like crazy, wins awards, is known in the community, etc. He or she is very likely outperforming the demographics of his or her location and we need to adjust that into the model. On the flip side, a partner who is not as engaged in the business may be underperforming his location and by inputting the efficiency and quality of the store, we will vastly improve the model. This will also help us see who is a great performer and who faces challenges; although mathematically that logic starts to get circular. Over time, this system will keep getting better, but that is as much up to us as a company as it is up to geoVue.

Published Friday, July 27th, 2007

Written by Nora Parker

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