RFC Franchising LLC

12400 North Meridian Street, Suite 190
Carmel, Indiana 46032
U.S.A.
Telephone: (317) 819-0700
Fax: (317) 819-0261
Web site: http://www.ritters.com

Private Company
Incorporated: 1989
Employees: not available
Sales: not available
NAIC: 533110 Lessors of Nonfinancial Intangible Assets (Except Copyrighted Works); 311520 Ice Cream and Frozen Dessert Manufacturing; 445299 All Other Specialty Food Stores

RFC Franchising LLC operates the Ritter's Frozen Custard chain of premium ice cream shops. Nearly sixty Ritter's outlets are located in seven U.S. states, two-thirds of which are in the firm's home state of Indiana. Each offers a half-dozen freshly made flavors of frozen custard (which is like ice cream but denser and richer) for cones, dishes, smoothies, and shakes, along with frozen custard cakes and pies. The firm is headed by Bob Ritter, son of the firm's founder.

Beginnings

Ritter's Frozen Custard was founded by a Chicago-based movie animator named John Ritter, who, though nearing retirement age, decided to seek a new career when the animation industry began turning to computers in the 1980s. While discussing the idea with his family, one of his sons reminded him that he had often said he wanted to open his own ice cream shop. He had fond memories of the fresh ice cream he had made at a high school job in the late 1940s and also of family trips to neighboring Wisconsin for frozen custard, which was extremely popular there. Ritter decided to open a frozen custard shop of his own and spent several years researching different formulas until he had created one that satisfied him.

Similar in many ways to ice cream, frozen custard includes a small amount of egg yolk and has less butterfat. It is also much denser, as it contains less added air: ice cream is typically 50 percent air, while Ritter's custard is just 11 percent. Because of this, and because it is served at a warmer temperature than most ice cream (18 degrees), its flavor is noticeably more intense and rich.

Once Ritter was satisfied with his custard formula, he and his wife Bonny began looking for a site to open a shop. Initially hoping to locate in Bloomington, Indiana, they had difficulty finding the right property. On a drive through of the Indianapolis suburb of Franklin, however, Ritter came upon a site that looked good, and he quickly arranged to acquire it. In 1989, the first Ritter's Frozen Custard shop was opened.

Frozen custard was not well-understood in mid-Indiana, and at first the shop attracted few customers. Some who did try it, Ritter later told the Indianapolis Star and News, "thought it was mom's chocolate pudding." Business got a boost at the end of the 1992 sales season, when Ritter's Frozen Custard was voted best dessert in a poll of Indianapolis Star and News readers. The next spring, traffic picked up noticeably, with some customers driving in from as far away as Kentucky for the frozen treat.

RFC Franchising Formed in 1994

Ritter subsequently opened a second shop, and in 1994, after his son Bob had joined the company, began making plans to franchise the idea. Saul Lemke, who had many years of franchise experience, was hired to help run the newly named RFC Franchising. In 1995, the first franchise outlet was opened in Bedford, Indiana.

Ritter's Frozen Custard shops featured a round blue roof and patio seating covered by blue-and-white umbrellas, which encouraged families to sit and enjoy their ice cream outdoors. John Ritter believed strongly in the value of family, and he wanted his customers to enjoy their frozen custard together in a pleasant setting where they could socialize with friends and neighbors while waiting in line. Because demand for frozen desserts dropped during the winter, the stores were only open for eight months of the year.

Ritter was highly selective when choosing franchisees, turning down the vast majority of those who inquired about opening a shop. The company kept strict control over its franchise outlets and issued detailed guidelines on how each should look and what they could sell. The initial franchise fee was $15,000, and RFC also collected a royalty of 5 percent of sales.

By early 1998, the chain had grown to seven shops, and during the year seven others were opened, six in Indiana and one in Texas. By now, the company was gaining a reputation within the industry for its quality, cleanliness, and service. True to his original inspiration, Ritter's shops served only custard that had been freshly made on the premises each day, and the firm's outlets made their own fresh waffle cones as well. Custard unsold at day's end would be packed into pints or quarts and frozen for take-out sale. Though Ritter had created more than eighty flavors, only five were offered at a time. Vanilla and chocolate were always available, along with one nut flavor, one fruit flavor, and one special flavor. Prices ranged from 99 cents to $3.59 for a range of items that included cones, dishes, shakes, floats, sundaes, and the "Glacier," which had mixed-in toppings and was thick enough to be served upside-down.

Florida Expansion Rights Sold in 2001

By the start of 2000, more than twenty locations were open, and a year later the total stood at twenty-eight. Ritter's outlets were now in Arizona, Florida, Kentucky, Texas, Ohio, Michigan, and Indiana. In June 2001, the company sold the rights to expand in Florida to two Ritter's franchisees for $175,000. They formed Ritter's of Florida Franchising, which would split the franchise fees and royalties from every store they opened with the parent firm. Plans were soon announced to open 100 stores there over the next decade. Florida outlets could bring in revenues year-round, unlike those in the Midwest, which were closed during the winter months. The move was reportedly made because RFC did not have the systems in place to handle such rapid growth itself.

By this time, the company was also working on a redesign of its stores, which featured some interior seating (earlier stores had only offered outdoor seating) and a drive-through window. The design would allow all of the chain's new stores to be open year-round, instead of just during the warmer months. The first prototype opened in Indianapolis in early 2002.

In the summer of 2002, Ritter's suffered a brief round of negative publicity when one of its franchisees, Peter Loomis, cancelled a scholarship program for his young employees. His promise of $3 per hour in scholarship money, to be paid out when employees had worked for 500 or more hours for three consecutive seasons, was fulfilled by company founder John Ritter, who stepped up with more than $20,000 to help pay five former employees' college expenses. Loomis blamed the policy change on the deteriorating business climate that came on the heels of the September 11, 2001 terrorist attacks against the United States. The economic downturn was also slowing expansion, with only a handful of the projected Florida outlets actually opening.

In September 2002, the company announced that all future stores would be built with the square-shaped, indoor-seating format. Existing stores in the older round-shaped design would retain their eight-month seasonal schedule, while the newer outlets would remain open for eleven months (all except January). The move would help the chain increase sales in the colder months as well as on rainy days, when the outdoor seating only stores had difficulty attracting customers.

In November 2002, Ritter's granted an exclusive license to J. Beard Franchising to franchise Ritter's shops to casinos and riverboat gambling operations. Five locations were expected to open over the next two years, with the first being the Horseshoe Casino in Hammond, Indiana, and the Flamingo Hilton and Las Vegas Hilton in Las Vegas. J. Beard was also granted a non-exclusive license to sell Ritter's franchises at other nontraditional venues like airports, sporting arenas, and concert halls.

For some time, Ritter's had been offering a low-calorie vanilla frozen yogurt for its customers who were dieting, but it accounted for less than 1 percent of the firm's sales. The company decided to reformulate the product to make it tastier, and sales soon improved to more than 2 percent of total revenues. The new light vanilla custard had five grams of fat and 110 calories per serving, as compared with nine grams of fat and 180 calories for the standard custard. Other light flavors, including raspberry, caramel, chocolate, and espresso, were also created.

In 2003, the company introduced a new "inline center" shop, designed for use in strip malls. The first was built in Hendersonville, Tennessee, near Nashville. It featured a larger indoor ordering and seating area, and was set up to allow customers to watch the frozen custard being made. Display freezers were installed, stocked with pre-packaged pints, quarts, frozen custard cakes, and ice cream sandwiches, to encourage take-out sales.

Company Perspectives:

Our Mission: To delight each guest with the very best premium ice cream treats. To have our treats enthusiastically served by knowledgeable, caring, well-groomed Ritter's team members. To serve our guests in a relaxed, sparkling-clean environment.

Garfield Celebrated in 2003

The year 2003 also saw Ritter's introduce a line of smoothies, priced at $3 to $4.50, as well as a frozen custard cake that commemorated the twenty-fifth anniversary of the "Garfield" comic strip, produced by Indiana native Jim Davis. Davis, who had approached Ritter's with the anniversary idea, created four comic strips featuring the cantankerous cat that promoted the company's products, which were made available in limited-edition color prints at Ritter's shops to customers who bought five smoothies. A second promotion gave free Garfield-themed birthday parties to winners of drawings in each of the chain's fifty-four shops. The parties, for the winner and ten friends, would be hosted by a live Garfield-costumed character and included food, decorations, and party favors. Other promotions included a Garfield-themed summer safety program on the company's Web site, and a summer reading challenge for five to nine-year-olds, who received a free sundae if they read five books. Cats were not the only animal RFC used to promote its treats. Some company outlets featured "Dog's Night Out" on the first Monday of each month, offering free bowls of ice cream for dogs, whose owners responded enthusiastically to the idea.

In March 2004, Ritter's began to test-market retail packages of custard in pints and quarts, as well as custard cakes and pies, at a South Bend, Indiana grocery store. The move was motivated in part by a desire to make Ritter's products available year-round in areas where the stores operated for only eight months. The company had also begun promoting the low-carbohydrate light version of its custard to customers who were following the Atkins and South Beach diets, which emphasized foods low in carbohydrates as a way to lose weight.

The spring of 2004 saw a dramatic increase in the price of RFC's raw materials of milk, vanilla, and chocolate, and the company was forced to raise prices slightly to compensate. In September 2004, Bob Ritter, son of the company's founder, was named CEO of RFC Franchising. He had started out making custard and serving customers in the company's first stores and had in recent years been groomed by departing CEO Saul Lemke to take over the top spot. Ritter, age 34, announced that he would spend much of the next year focusing on building up the systems, communications, and training programs needed to produce quality franchisees who would build the firm into a national brand. He anticipated opening six to seven new stores by the end of 2004.

After just fifteen years in business, RFC Franchising, LLC had grown into a chain of nearly sixty frozen custard shops, which featured the company's distinctive line of scooped treats, along with smoothies, shakes, cakes, and pies. Ritter's Frozen Custard shops were in seven states, and the company was planning an ambitious national expansion in the years ahead.

Principal Competitors

Culver Franchising System, Inc.; Shake's Frozen Custard, Inc.; CoolBrands International, Inc.; Allied Domecq Quick Service Restaurants; International Dairy Queen, Inc.

Key Dates:

1989:: The first Ritter's Frozen Custard shop opens in Franklin, Indiana.
1994:: The company forms RFC Franchising to sell franchise opportunities.
1998:: Seven new stores open, doubling the chain's size to fourteen locations.
2001:: Rights to expand in Florida are sold to Ritter's of Florida Franchising.
2003:: Smoothies are introduced, "Garfield" promotion debuts, and the company's 50th store opens.
2004:: A retail line is test marketed; Bob Ritter is named CEO.

RFC Franchising LLC

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RFC Franchising LLC

12400 North Meridian Street, Suite 190
Carmel, Indiana 46032
U.S.A.
Telephone: (317) 819-0700
Fax: (317) 819-0261
Web site: http://www.ritters.com

Beginnings

RFC Franchising Formed in 1994

Florida Expansion Rights Sold in 2001

Company Perspectives:

Garfield Celebrated in 2003

Principal Competitors

Culver Franchising System, Inc.; Shake's Frozen Custard, Inc.; CoolBrands International, Inc.; Allied Domecq Quick Service Restaurants; International Dairy Queen, Inc.

Key Dates:

1989:: The first Ritter's Frozen Custard shop opens in Franklin, Indiana.
1994:: The company forms RFC Franchising to sell franchise opportunities.
1998:: Seven new stores open, doubling the chain's size to fourteen locations.
2001:: Rights to expand in Florida are sold to Ritter's of Florida Franchising.
2003:: Smoothies are introduced, "Garfield" promotion debuts, and the company's 50th store opens.
2004:: A retail line is test marketed; Bob Ritter is named CEO.