Malls still work for A&W operator, plus Lighthouse and Smoothie King moves
Illustration by Jonathan Hankin
“Holy crap,” exclaims A&W franchisee Linda Mulder in mock surprise, having been asked to recall her family’s long history with A&W. Mulder was just 12 when she began pouring root beer and serving hot dogs. Her dad, a restaurant vendor, had partnered with a local A&W franchisee in Lansing, Michigan, eventually buying him out.
“We just kept adding” restaurants. “We ended up with five free-standing and five in malls,” says Mulder, 62, who now oversees the 10-unit operation. The latest, a free-stander, opened in April, in the Lansing suburb of Fowlerville.
Malls, as nearly everyone knows, are under stress. Vacancies are mounting and, in some areas, malls are being razed. Mulder is only too aware of the situation, only signing two- or three-year leases. “In any food court, you live and die by how well the mall is doing,” she says, adding her units are in both good and bad malls. “If you get a good deal on your rent and watch your P’s and Q’s you can still make a little money.”
When Mulder and I spoke in April, her Fowlerville free-stander was just days from opening. It was her first A&W in 10 years. That’s partly because she wasn’t eager to expand the brand under Yum Brands, the franchisor from 2002 to 2011. “If you don’t feel good about leadership...” she says, her voice trailing off. (Side note: Mulder wasn’t standing still for those 10 years; she acquired 10 Long John Silvers and two Taco Bells from Yum.)
She purchased the building—which formerly housed an A&W/KFC co-brand unit—from a Taco Bell franchisee. “The owners wanted to know if we wanted to buy the A&W equipment. We said, ‘Why don’t we lease that empty building from you and make it an A&W?’”
The 2,200-square-foot space, which cost $250,000 to gut, came with a drive-thru window. It’s also near a highway exit, which should help it generate annual revenue of $750,000, Mulder says.
Caring for kids
Aspen Ricks spent 16 years working for a large for-profit child-care provider before she bought a child-care franchise from another outfit. “I was an area director, and I knew everything about everything,” explains Ricks, who has a degree in early childhood education.
Today, Ricks franchises four Children’s Lighthouse Schools in greater Kansas City, Kansas. She has opened one a year and plans to open two more over the next two years. Her most recent outlet opened in spring in Overland Park.
Ricks knows the metro area well, having been stationed there in here previous job. “I knew where the hot spots were, and that has really helped,” she says.
The couple built their first center from the ground up in 2014. The free-stander was expensive, but Rick’s figured it would help establish the brand in Kansas where it was then unknown. “It filled up really fast,” she says.
They opened a second center a year later in a strip mall and converted a freestanding building for their third unit. Number four opened this spring in a former Kinder Care. The Fort Worth, Texas, franchisor says the initial investment runs from $634,000 to $3.9 million. Royalties are 7 percent of sales.
To finance growth, the couple has borrowed from SBA-approved banks, to which in turn they offer employee discounts. “A lot of their employees send their kids to our schools,” Ricks says.
Ricks insists accommodating the number of children who apply for a spot has been her biggest challenge. “We’ve had very happy clients,” she boasts. It’s difficult to judge her competition. A quick online search revealed a fragmented market divided by for-profit and non-profit providers with various age-range limits. But the demand for such services appears to be there; roughly 25 percent of the population (615,490) in the Kansas City metro area are under the age of 18, according to the Census Bureau. That compares to 22 percent for the United States overall.
Ricks says most observers don’t realize child care services is a “hard” industry: “You’re dealing the two most important things to people—their money and their kids.”
Clay Koenig also has a leg up on your garden variety franchisee. Like Aspen Ricks, he spent several years helping other franchisees improve operations—in his case, as an international development executive for New Orleans-based Smoothie King. Koenig had also earlier owned two foodservice franchises. “I didn’t have the best experience with either,” he recalls.
In 2012, however, he left corporate to buy a Smoothie King In Mobile, Alabama. Still, expanding beyond that one unit (his plan) would be difficult. So Koenig approached veteran Smoothie King franchisee Travis Bolster, who operated five units along Mississippi’s Gulf coast and whom Koenig knew while at corporate.
“I asked him if he’d like to partner in a D’iberville unit” in Mississippi, Koenig says. The upside was obvious; Bolster was not only a tremendous operator, he also had an infrastructure. Koenig concedes he was minimizing his upside (i.e., profits) by partnering, yet he was also minimizing his downside (losing money).
Bolster agreed to the plan, and today he, Koenig and John Gordon (a third partner and a real estate executive for the franchisor) together own and operate five Smoothie Kings. They have used bank financing to open the units in their partnership.
While a unit near Florida State in Tallahassee, Florida, has been a home run, the partners nonetheless plan to open Smoothie Kings in small towns like Laurel, Mississippi (pop. 18,837). Declares Koenig: “A store just opened in Hattiesburg. Meridian is doing exceptionally well.” Mississippians “are very loyal and extremely aware of the brand.”
David Farkas has covered the restaurant business for 25 years as a reporter and food writer, and writes about development deals in The Pipeline in each issue. Send your franchise’s development agreements to him at email@example.com.