Concepts jump the pond to test their wares in U.S. market
Kono Pizza and French Fry Heaven are two concepts with European roots now trying expansion in the United States. The allure? The United States is a big and interesting market, one expert notes, but not an easy one.
When Paul Revere declared “the British are coming,” all those years ago, he did not anticipate his descendants’ warning cry would be more along the line of European franchise concepts invading America to sell pizza in a cone or gourmet fries with zesty toppings like spicy wing sauce or cheeseburger.
Above, an employee prepares a Kono Pizza cone, shown in its crisply done stage, below. The franchisor has waded into Long Island.
Yet Kono Pizza and French Fry Heaven are convinced their cuisines will be a hit in this nation. The food operators are among a growing number of foreign brands spending big bucks to expand into the U.S. market, hedging their investments will pay off with a new pool of customers.
In the cone
Co-founder Carlo Ruggiero of Kono Pizza USA says introducing a new brand to the U.S. is a difficult task. But Kono Pizza believes his concept differs from rivals in the flooded pizza market with its pizza cone. The non-traditional pizza includes an on-the-spot made cone-shaped crust filled with Italian ingredients, an on-the-go meal the founders say is healthier and cost $5 or less.
Kono Pizza started in Italy in 2004. But it was last summer when New Jersey natives Ruggiero, David Ragosa and Greg Kinlaw founded Kono Pizza USA as a franchisor and opened the first location in Edison, New Jersey. They’ve secured exclusive rights for the U.S.
They discovered the concept’s popularity after visiting Europe. Kono Pizza has 130 locations in 20 countries. The pizza cone is cherished in Europe, Australia and Asia. “We are confident it will also be a huge success here,” Ruggiero says.
Ragosa says an agreement has been signed with an entrepreneur in New York to introduce 10 Kono Pizza locations to the Long Island area, and another has been signed with two partners to open three locations in the San Diego area. Ragosa and his partners plan to open a corporate-owned location in Raleigh, North Carolina, in the first quarter of 2014.
All told, they expect to open 15 locations by late 2014 and up to 90 locations by late 2018. During the next five years, the trio plans to team up with franchise partners to open sites in traditional kiosk or stand-alone store formats.
Greg Kinlaw says the mission is to keep everything simple and affordable for franchisees by offering a streamlined, manager-driven business model. The total investment to open a Kono Pizza will range from $200,000 to $400,000.
French Fry Heaven CEO and founder Scott Nelowet shows off the brand’s gourmet fries. He got the idea when visiting Europe.
As founder and CEO of French Fry Heaven, Scott Nelowet has ambitious plans for his gourmet fry stand. The idea of trying the concept in the U.S. came about after Nelowet and his wife traveled to Europe. He was amazed there were more fry-only places per capita in Europe than there are McDonald’s in America.
French Fry Heaven offers Belgium-style fries (Angels) and sweet-potato fries (Saints) that can be dressed up with more than 50 different seasonings, salts and sauces. Nelowet opened the first store in Jacksonville, Florida, in 2011. The company expects to have 14 stores in Texas, Massachusetts, New Jersey, Louisiana, Ohio, Florida, New Hampshire, Maryland and Washington by February 2014. Nelowet says he has agreements with franchisees to open 56 stores in the next few years nationally. It costs $114,000 to $290,000 to open a new location, depending whether it’s a stand-alone store, kiosk or mobile truck.
With the concept being so new, Nelowet took a calculated risk by opening several sites. Getting promising early results, he’s now opening stores where he believes the concept will work. “Our challenge is a little bit unique in that we’re trying to introduce a niche and build up the brand,” he says.
But it won’t be a cinch for the new brand to crack the highly competitive U.S. landscape
By far the largest
Philip Zeidman, a senior partner in the Washington, D.C., office of DLA Piper, says it’s not surprising foreign franchise concepts are looking at and expanding into the American market because it remains by far the largest and most interesting potential market in the world.
An international franchising expert, Zeidman says what’s really surprising is how long it has taken for some of those concepts to begin expanding here again. He says in the 1980s and into the 1990s some European firms that expanded into the U.S. and did not survive used the nation’s franchising regulations as a reason for failure. But he says being under-capitalized in many cases was the cause of their downfall, not regulation in the U.S.
Many foreign businesses expanding into the U.S. are European-based companies, he says, because franchising has been growing quickly there in recent years, yet economies have in some cases stalled.
Zeidman says that’s been particularly true in France, one of Europe’s most heavily franchised countries. He pointed out many of the companies coming to America have ties to France.
Patience is needed
Some of the European concepts being tried here specialize in niche products or services, including Kono Pizza and French Fry Heaven. But Zeidman says it will take patience to see how successful those companies can be. He pointed out some European companies that have done well here, noting Le Pain Quotidien. Founded in Brussels in 1990, Le Pain Quotidien has more than 200 bakery-café locations in 17 countries, including Belgium, the United Kingdom and the U.S. In the U.S. stores are in New York, Los Angeles, Philadelphia, Connecticut and Washington, D.C.
Zeidman says other foreign concepts with origins outside of Europe are starting to make inroads, including Jollibee and Pollo Campero. Jollibee is a Philippines-based fast-food chain with more than 800 locations globally, including 29 in the U.S.—California, Nevada, New Jersey, New York, Virginia, Texas, Washington and Hawaii. Pollo Campero is a Guatemala-based Latin chicken restaurant chain with more than 300 locations worldwide, including more than 50 in the United States.
“But until we begin to see companies that can take on the likes of McDonald’s or Cheesecake Factory, it will be tough to make a judgment on their long-term success,” Zeidman says.
Not for foodies only
The foreign invasion extends beyond food, as well. Seeing great expansion opportunities, Cartridge World, which entered the U.S. in 2003, plans to open at least 12 new U.S. stores this year. It was founded in Adelaide, Australia, in 1988, but is now based in Spring Grove, Illinois. The global ink-and-toner printer cartridge franchisor has about 550 U.S. retail locations. Total investment for a franchise is around $80,000.
Bill Swanson, North American CEO of Cartridge World, says the need for local home and office printer expertise exists in every city, especially those with a population of 50,000 to 100,000 people.
He says there are easily 2,500 to 5,000 small and mid-size businesses in those markets, his firm’s target. “Across the U.S. alone, we have room to double our market penetration,” Swanson says.