Summertime Sell If you can wait out the winter months, a frozen-dessert franchise could be a hot seller for you, too.

By Todd D. Maddocks

Water is an interesting commodity. When you consider the profitmargins, and the fact that you're selling something that can bereadily had for free, selling bottled water might be considered theperfect business. And if you add a little flavoring and some fruit,then freeze the water until it's slushy, you also have theingredients for a pretty sound seasonal business. Just take it fromRita's Water Ice.

A Rita's Water Ice franchise is a retail frozen-dessert shopoffering Italian ices, cones, shakes, frozen custard, gelati (acombination of ice and custard) and soft pretzels.

Rita's was started during the hot Pennsylvania summer of'84 by the Tumolo family. Today, Robert (whose ex-wife thefranchise is named after) and John Tumolo still operate the companywith the help of a staff of 30. Rita's touts itself as thelargest Italian-ice chain in the country, with more than 230 storesin nine states. Those locations stretch along the East Coast, withmore than half the chain's stores in Pennsylvania, and go asfar west as Ohio.

This is a seasonal business, and many of the stores, other thanthose in Florida, are open only from mid-March through October. (Asweather is obviously a factor, you may want to look elsewhere for abusiness opportunity if you live in the Snow Belt.) Operating aseasonal business can be a mixed blessing, because, on one hand,you can take some time off during the winter months; on the other,the rent continues and your employees are, perhaps literally, leftout in the cold each year. Furthermore, my experience innegotiating tenant leases has been that the better centersdon't want a dark storefront at any time, so finding realestate could be an issue. An ideal Rita's is 800 square feetwith a walk-up window, which makes the real-estate issue even morecomplex.

The Rita's franchise offering is relatively standard fare,but the royalty provision is a bit unusual, as it's based onwhat Rita's estimates your sales should be according to theamount of prepared Rita's mix you've purchased. Rita'searnings claims, stated in Item 19 of its Uniform FranchiseOffering Circular, indicate that stores open for at least one yearpost average sales of $175,006. Stores open for at least five fullseasons have average sales of $192,597. Rita's management hasdisclosed that sales levels reported by franchisees were typicallylower than the estimates used to calculate the figures in Item 19,so you should closely scrutinize the basis for these earningsclaims. An important note: In each instance, more than half thechain reported sales that were below average.

As a franchisee, you're required to use Rita'sproprietary mixes for your products. Mix sales accounted for 65percent of Rita's total revenue in 2000. You're granted aprotected territory, but it only extends from one-tenth of a mileto 1 mile, unless you're in a smaller market, where theterritory could be as large as a 2.5-mile radius around your store.Your territorial protection doesn't extend to many alternatesources of distribution, as Rita's reserves the right to sellits product in grocery stores, vending machines, etc. That may posea problem in the future, but Rita's has yet to expand in thatdirection. Still, a savvy franchise candidate would try to gaingreater protection in this regard.

Todd D. Maddocks is a franchise attorney, small-businessconsultant and founder of Franchisedecision.com.