Under new leadership, Rita's Italian Ice ready for overseas debut

Pennsylvania-based Rita's Italian Ice has a history dating back to 1984 and a devoted fan base. Still, newly appointed CEO Jonathan Fornaci has already begun implementing plenty of changes.

Fornaci has proven he's capable of making substantial adjustments. In his most recent position as CEO of Straw Hat Pizza, which he held for about four years, he overhauled the brand's in-store design and menu garnered a broader market reach and launched a new, upscale grill concept.             

In December, he left the job he loved in a city he loved (San Francisco) to take the Rita's position. He had never been to Philadelphia before his appointment.

"When I looked at everything about Rita's – the products, the franchisees, the customer loyalty, I knew I could believe in it on a personal level," he said.

In addition to moving to a new city and working with a new concept, Fornaci also began implementing new strategies to position Rita's as a top destination in the specialty beverage and dessert space. Some of those changes include:

International and domestic expansion

Rita's currently operates in 18 states with approximately 550 stores. Most of those locations are on the East Coast and the Midwest, close to the company's Trevose, Pa., headquarters. The exceptions are Arizona (2 units) and Texas (8 units).

Fornaci hopes to add 45 new stores in the first half of 2012, with target markets such as the Carolinas, Georgia, Florida, California, Arizona, Nevada, Texas and New Mexico. The brand's footprint is also set to grow along the I-95 corridor on the East Coast.

"We're already in a lot of these markets, but our focus will be on density. We'll also look at a lot of markets where we can be open 12 months a year – such as Florida and Arizona," Fornaci said.

Rita's is also set to debut in foreign territory this year. Fornaci said a deal has already been negotiated for about 30 locations to open in the Southern China market.

"This will be the first international deal for Rita's, and I think it fits in very well with the Asian marketplace. There are no deals signed yet, but I also like the Caribbean and Middle Eastern regions because the flavor profiles fit well there," he said.

New store formats

Fornaci also added more layout options for franchisees. Rita's traditional models are 1,200- to- 1,500-square-foot spaces that seat about 20 to 25 guests.

"The model works well in certain markets and for certain real estate, but by demanding that every franchisee does it puts them at a disadvantage where there are high rents or the locations don't make sense," Fornaci said.

Rita's now offers a smaller footprint, 800 square feet or less, which cuts the real estate costs in half for franchisees, from about $250,000 to $148,000 per unit.

"This not only reduces the franchisee cost dramatically, it allows us to expand into areas we wouldn't normally have considered," Fornaci said.

Additionally, Rita's now offers a satellite concept, which features the same menu but in about 500 square feet of space. Ideally, franchisees own a main store, where the products are manufactured with Rita's proprietary equipment, and then move the products to their satellite store.

"A franchisee can have a main store and then three satellite locations – which do the same volume as a main store – for less than $500,000. There is fantastic profitability with the concept, which can fit on a boardwalk, in a shopping center, museums, zoos, etc.," Fornaci said.

Finally, Rita's just rolled out its first mobile food cart. The cost, with all of the necessary equipment, is $35,000.

"I'm excited about the mobile option because franchisees can now do business and bring Rita's anywhere for about $500 a month," Fornaci said. "One size does not fit all and it's important to be flexible so that the franchisees make a profit."

New marketing approach

Rita's has a social media following of about 600,000 Facebook fans and about 1.2 million unique visitors a month. Social media will continue to be a strong focus for the brand. What will be noticeably different starting this year, however, is its television presence.

"Historically, Rita's has only done radio. The company has never done TV. We will be moving into TV across all markets," he said. "It makes perfect sense for our brand, which is about bright, vibrant colors and kids having fun. I think this move will have a huge impact on attracting new customers."

Rita's marketing theme will higlight the brand's differentiation.

"There is nothing like this in the frozen dessert market. We've got something unique and of quality and I'd like to build on and communicate that," Fornaci said.

Research and development

Rita's menu will continue to boast an extensive list of Italian ice flavors, signature Misto ® shakes, frozen custard, Gelatis and Blendinis. There are plans to launch 10 new flavors of Italian ice this year, in addition to the 36 currently available.

The company will also test new milkshakes, ice cream sundaes and other novelties, such as custard cakes, and may even dive into the coffee space.

"Coffee can add incremental sales without cannibalizing what we already have. We can do coffee with custard and with whipped cream because we already have those things, and we can offer a very high quality product," Fornaci said.

Equipment

Finally, Fornaci has changed the equipment package requirements for franchisees. Prior, Rita's operators were required to purchase new equipment. Now, the company sources suppliers for used/refurbished equipment. The savings for franchisees is about $40,000.

"Our business model has to be 100-percent aligned with the franchisees. If we're making money on equipment, that doesn't make sense," Fornaci said. "Our franchisees are people who take second loans out on their houses because they love this brand so much. My function is to make sure they succeed. If they're making money, so is the company. It's as simple as that."

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