Rita's finds that change is good

Rita's finds that change is good
Tags: Coffee/Bakery/Donut, Franchising & Growth, Operations Management
May 28, 2009 - Christa Hoyland

*Click here for a slideshow of Rita's Italian Ice recent product innovations.

Jim Rudolph had no intention of becoming the permanent chief executive of Rita's Italian Ice when the group of investors he was part of bought out the concept in 2005.

"I said, 'I'll help start it up. After a couple of months, I'll go back' (to Pittsburgh)," he said. "I haven't left in four years."

Rudolph, a former Wendy's and Chuck E. Cheese franchisee, soon became committed to the brand. He not only stayed, commuting by plane to Rita's Philadelphia-area headquarters, he turned the concept on its head.

"We changed everything," he said.

Some of his more significant changes include the new brand culture he created for the corporation and the franchise system, as well as launching a new store model. He also emphasized research and development as well as implemented improvements to the chain's distribution system.

At the corporate level, he renamed the headquarters the Cool Support Center. From franchisees, he asked for commitment to the brand, consistency in operations and openness to change. He launched an intranet site called Coolnet to facilitate internal communications, and instead of only seasonal stores with walk-up windows, the new model is a year-round concept with the counter indoors.

He also put more emphasis on R&D and reformulated the recipe for the chain's ice production, which is made fresh daily in stores, so that less was made at a time, eliminating waste.

Although the turnaround has proven successful so far not everyone was open to the changes, and a number of franchisees left the system. But with the chain thriving as it prepares to celebrate its 25th anniversay, Rudolph has no regrets.

"I'm doing something 100 percent different than what they did before, and (I told them) you have a choice — you can either join me or leave," he said. "I said, 'I want you to be successful. Follow me, trust me, respect me, believe in me as I do with you, and we'll do this together.'"

Focus on R&D

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Although Rudolph has brought sweeping changes to the brand, all came with the support of the brand's franchise advisory council, such as adding several new flavors annually. When Rita's added a new flavor in 2006, it was the first in nine years, he said.

Since then, the chain has added sugar-free flavors of Italian ice, fat free frozen custard, a line of frozen blended treats and a line of fat-free soft serve. This year, the brand also will add a total of 11 new flavors, including four sugar-free flavors. The stores have 40 flavors for their Italian ice available to them and offer 10 to 14 each day to customers.

Mitch Cove, a franchise partner with three locations in the Philadelphia market, was one of Rita's first franchisees in 1990. Then, it was a simple concept with each store run more like a mom-and-pop than a chain and development was conservative.

When Rudolph took over, "it was like a shock to the system," Cove said. "It was hard to accept at first."

But the changes were for the better, he sees now.

"He brought us into the 21st century, streamlined the entire business," Cove said. "And he raised the bar."

A better system

While other franchisees left, Cove stayed because he said he is open to new opportunities and he saw the sense in Rudolph's improvements. He said he is pleased with the company's marketing efforts and initiatives developed for franchisees.

For example, Cove's stores recently implemented a community event known as Celebrity Scoop. He invited local teachers and principals to act as servers for a day. The schools got a percentage of the proceeds and his stores gained more awareness.

"It brings people to the store and creates some excitement," he said.

Cove said he likes the company's intranet site as well, although keeping up with communications is more time consuming.

"It requires a lot more time at your desk in front of the computer trying to keep up with the information that's being sent out," he said. "You're not in front of the store as often as you might have been a couple of years ago, which is good and bad. It's not more challenging; it's just different."

Do the right thing

Rudolph said his approach is to run the company "as a franchisee would want a franchisor to be."

He holds the late Dave Thomas, founder of Wendy's, as his model.

"I had the best mentor in the world (and his motto) 'Do the right thing," he said.

And the right thing is to get the right people on board.

"You get the right people, you'll do the sales; get the sales, you do the profit," he said. "It's about doing the right thing. It's about being partners with your franchisees."

Although a number of long-time franchisees left the system, more have joined. Since 2005, the number of Rita's units has grown from 310 to more than 550. Rudolph estimates the chain will have 600 stores by the end of the year.

The economy has slowed growth some for the franchise-only system, but plans are still on track for 75 new units this year, he said. The recession has actually helped the brand as more consumers look for inexpensive treats.

This week, Rita's announced it's first store opening in Texas, making it the 18th state in which the chain is located. Most of the chain's locations are along the Eastern seaboard, and moving so far West is significant step for the brand.

Rudolph said that even in states where Rita's has several locations, the chain struggles with brand recognition. Rita's combats that with having a presence on Twitter and Facebook. And the company recently began an initiative to offer coupons for free regular Italian ice for customers to try the brand for the first time.

"When people come into these stores for the first time, they're taking a risk," he said. "How do we eliminate the risk? That's really our No. 1 challenge is getting people to try this product because once they try it, well, we got you."