New Brands Spreading Franchise Fever In O.C.

After struggling during the recession, franchising gained some traction in 2012 and is forecast to grow almost as much in 2013, according to a study prepared for the International Franchise Association.

And some franchisers say they have their sights on Orange County for this year’s growth. That’s good news because one out of 10 U.S. employers is a franchise and, collectively, they contribute about $800 billion to the U.S. economy.

These newcomers rate Orange County highly for its large population and desirable lifestyles, demographics and disposable incomes. Two dessert franchisers add great weather to their list.

Among the diverse franchisers moving into Orange County:

Kona Ice , Tennessee, shaved ice trucks, already has four franchised territories in Orange County and six more prospects.

Children’s LightHouse , Texas, education-based child care, has two Orange County sites under construction and plans for up to 18 more within seven years.

Right At Home , Nebraska, at-home elder care, has four Orange County franchisees and plans for up to 13, based on the population over age 65.

Sloan’s Ice Cream , Florida, upscale dessert and gift shops may have its first shop in Orange County by summer, and an entrepreneur has signed an agreement to build five more in Southern California, with plans for 30 eventually.

Instant Imprints , San Diego, promotional products and sign supplier, expects to have two franchises open in Orange County this year.

Dunkin’ Donuts , Massachusetts, doughnut and coffee takeout, is recruiting multi-unit franchisees for Southern California, including Orange County. Dunkin’ Donuts plans to open an unspecified number of restaurants in the region by 2015 after opening 291 nationwide in 2012 and scheduling up to 360 new units to open this year.

Another Broken Egg Cafe , Florida, upscale breakfast restaurants, is scouting for as many as four locations, including Newport Beach, Huntington Beach and Anaheim.

Good weather is one of Orange County’s best attractions. “We’re profitable in areas with seven-month selling seasons,” said Kona Ice founder Tony Lamb. “In California, you have 10, 11 months of good weather that make for a better business model. Of course, Orange County has a huge population.”

Eric Wilford, whose three Orange County Kona Ice trucks work from Dana Point to Huntington Beach, cited coastal Orange County’s high disposable income and parents who care about their schools’ finances as important factors in his success. Kona Ice gets most of its business at schools, youth sports leagues and other nonprofits that get 20 percent of revenues from franchisees’ sales at their events and fundraisers.

Wilford owned a mortgage company for 20 years and became Kona Ice’s first California franchisee after the mortgage meltdown. Each truck is a separate franchise, and he says three are enough for him to run.

Kona Ice has one of franchising’s lowest initial fees, $1,500, and a flat $3,000 yearly royalty instead of a percentage of revenues. Total cost including truck and training is $99,000, Lamb said.

More important than weather for Sloan’s Ice Cream is Orange County’s lifestyle, according to founder Sloan Kamenstein. He is just starting to franchise after proving the success of premium ice cream, candy and toy shops in Palm Beach, Fla., since 1999.

“California is a priority for us,” Kamenstein said. “We’re a destination and experience, and you have a lot of fantastic lifestyle centers in California.”

San Diego businessman Larry Greenberg bought exclusive development rights for Sloan’s in Los Angeles and San Diego and agreed to open a demonstration store in Orange County to attract other developers.

“I have identified two likely locations in Orange County, and as it works out, it is likely to be the first to open,” said Greenberg, who also owns multiple Edible Arrangement franchises.

“I’m a business junkie, and I’d been looking at Sloan’s for quite awhile,” Greenberg said. “It’s a very expensive store to build – about $800,000 – but its sales are five to six times greater than the average ice cream store.”

Sloan’s franchising fee is $40,000 and royalties are 6 percent, said David Wild, head of franchise development. Startup costs range from $600,000 to $900,000, depending on real estate costs.

Instant Imprints is only now moving into Orange County, although it has been franchising since 2002, said President Ralph Askar. He had the master license in Canada and bought the parent company two years ago. The proximity to the San Diego headquarters makes Orange County a logical move.

“We have 45 stores: two in San Diego, one in Corona and one in Concord. Orange County is a huge opportunity for our concept,” Askar said. “Eighty percent of our business is with small to mid-sized firms, and there are 300,000 firms in Orange County.”

Instant Imprints combines three businesses: promotional products emblazoned with a company’s name; clothing with a company name put on by embroidery or heat transfer; and signs and banners. The total cost is $150,000, including a $29,950 initial franchise fee and $10,000 marketing budget. Royalty is 6 percent.

Children’s Lighthouse is eyeing Orange County for another of its demographics: large numbers of families with children under 18 and an appreciation of educational components at child care centers, according to Stephen Dixon, head of franchise development for the Fort Worth, Texas, company.

“Orange County fits what we have been successful with in other places,” he said. “Thirty-seven percent of households have children under 18 at home, high median income … and high percentage of parents who value phonics, math, character and values education and a very structured day.”

Like Sloan’s, Children’s Lighthouse isn’t an inexpensive franchise. Total startup costs, including building construction and working capital, are around $3 million, Dixon said.

“We haven’t had difficulty getting good franchisees,” Dixon said. “We have high gross revenues.”

Right At Home is attracted to Orange County for the opposite end of the demographic scale: Orange County has nearly 400,000 people over 65, and the number will grow exponentially, said Eric Little, vice president of franchise development.

“We’re not even taking care of the aging baby boomers yet,” Little said. “But we want to have our operations in place so when baby boomers need our services, we will have a reputation in the market.”

In addition, most at-home care is not covered by insurance, so Right At Home looks for communities where people have enough income to pay for the services, he said.

Right At Home’s startup costs are $100,000, including a $42,500 initial franchise fee. Royalty is 5 percent, Little said.

Greg and Pat James of Orange recently opened the Fountain Valley Right At Home franchise because they have retired and wanted a business that would help people.

“We didn’t want to move after we retired. We like Orange County,” Greg James said. “We saw a need here. The target group of 65-plus is growing.”

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