Frozen Assets

Hot new franchise opportunity is the coolest. Frozen custard serves up $16 million a year.

(Saturday, November 01, 2003) - Frozen Custard: It's an old-fashioned dessert with contemporary appeal, and it's the foundation of one of the hottest new franchises available.

The founders of Shake's Frozen Custard based in Fayetteville, Arkansas, have put together the key ingredients in their recipe for success: a high-quality product and a unit format that combines the nostalgia of its 50s theme with an awareness of contemporary consumer preferences (a double drive-thru, double walk-up, fast service, sparkling cleanliness).

How did they do it? Co-founders Don and Debbie Osborne have been hands-on owners since opening the first Shake's Frozen Custard store in 1991 in Joplin, Missouri. The son Corey expressed an interest in joining the family business and in opening his own store in Fayetteville, Arkansas. He worked for a year in the first store, getting a thorough education in the business, before opening the second Shake's in Fayetteville, Arkansas in 1997.

Don and Corey found the location and did the renovations themselves. At that point, Corey says, "We had no aspiration of growth beyond the two family stores. We were so focused on the quality of the product and serving our customer, it's almost like we didn't look up at the time. But we were bombarded with questions from people who were interested in franchises. So we talked about it and determined that we wanted to do it, and that we were going to put our whole heart and soul into it."

Originally called Shakey's Frozen Custard, because Don's nickname was Shakey, the name was changed to Shake's once growth began, so as not to conflict with the well-known brand of Shakey's Pizza.

With the growing interest in franchisee Corey's commitment to the company and the franchise plan made it natural for him to assume a leadership position. Today, Don and Debbie continue to play a role in corporate decisions, but most of their time is spent running the Joplin store. "We're a team here; a franchise family," Corey says. "We have a lot of talent, and everyone uses their skills and abilities in the best possible way."

Included in that talent is Jim Buckner, Executive Vice-President and former TCBY franchise executive, and John Harrell, Chief Financial Officer and a former banker who granted the original loan for the first Shake's unit. This tip-notch senior management team leads an exceptionally skilled home office staff committed to expanding and supporting the franchise system.

Old-fashioned quality, new-style operation

Traditionally, mom-and-pop frozen custard stands have been seasonal operations, often closing for the winter, particularly in northern climates. Shake's has developed a format with year-round potential and popularity. With a 50s theme, Shake's stores invoke a sense of nostalgia and a return to a simpler time. But the Osbornes are keenly aware of the demands of today's consumer: quality, service, and cleanliness.

As a product, frozen custard is superior in quality to any other frozen dessert. The ingredients required by law to call the product frozen custard, along with the method of manufacturing, make frozen custard a smooth, rich, deliciously satisfying gourmet ice cream. And because the product is made with no air infusion, it is a far better value than most premium ice creams and frozen yogurts. This quality and value gives frozen custard a strong appeal to prospective franchisees from the product perspective. From the business angle, Shake's unique format and streamlined operation is drawing franchisees like-well, like kids to ice cream.

And at Shake's, frozen custard is also easy to get-a particular appeal to today's busy families with commuter lifestyles.

"The drive thrus offer customer convenience year-round, and especially in bad weather," says Corey Osborne. "While this is a somewhat seasonal business, the seasonality falls away as the unit matures. Our stores have a very loyal customer base. We've had folks wait in line at the front windows in the snow, holding umbrellas." Every Shake's franchisee reports a similar degree of customer loyalty not typically found in the quick-service restaurant category. Corey adds, "Of course, we are not taking that loyalty for granted. We have strategies to combat seasonal fluctuations. For example, least year we introduced our Shake-a-ccino, which is a hot cappuccino product with a scoop of frozen custard. That's very popular, especially in cold weather."

Seasonal menu items are just one way Shake's is supporting franchisees and growing the company. And though Shake's will counter the potential of a winter slump with appropriate offerings, the company is careful not to clutter up the menu with an excessive number of choices. Business is booming.

"We offer what is popular, what the customers want," says Corey. "They know they're getting quality, they know what they want, and they don't want to waste their time searching through a menu. We keep our menu streamlined to increase efficiency, custom convenience, and profitability.

The double drive-thru is another customer convenience that is particularly appealing to franchisees, because it attracts consumers who commute and would prefer not to have to leave their cars. Professionals, blue-collar workers, students, soccer moms and more-they're all driving through for a treat. "We're doing what nobody has ever done; we're selling an extremely high quality product from a drive-thru," Corey says. "People drive through, get a world-class product for real value, and eat it in their cars or take it home."

For new franchisees in most industries, one of the biggest challenges is finding the right location. Shake's franchisees have a little help from another Arkansas-based company: Wal-Mart Realty, the real estate division of Wal-Mart Store, Inc. Wal-Mart has excess properties in great locations, primarily adjacent to new Wal-Mart stores, that they are willing to offer Shake's franchisees at a fair market price. Wal-Mart has already done the market research, as well as handled issues such as zoning, environmental questions, utilities, etc., which saves the franchisee time and money in the pre-opening stage.

Under the right circumstances and where space is available, Wal-Mart will also consider carving an out-lot property from an existing store parking lot to provide a location for a Shake's franchise. Because most of the franchisees Shake's is attracting are multi-unit operators, this real estate opportunity provides the ability to expedite market penetration for franchise territories.

It is this combination of old-fashioned values and forward-thinking business acumen that has positioned Shake's Frozen Custard as one of the hottest new franchises. The company is established in the South, Southeast, and Southwest (though franchise opportunities still exist in those areas), and is moving into the Midwest, targeting Kentucky, Indiana, Illinois, Ohio, Michigan, Wisconsin, and Iowa.

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