For Freddy’s CEO, ‘lunchtime hobby’ is now a chain
Freddy’s Frozen Custard expects to open 40 units this year, up 40 percent from 2013.
How two brothers dreamed up a restaurant, named it for their father and relied on their background as franchisees to make decisions. Freddy’s is on an impressive growth tear today.
Freddy’s Frozen Custard is one of the fastest-growing restaurant chains in the country right now. The company is on pace to add 40 units this year, a nearly 40 percent increase from last year, and expects to add even more next year. Stores boast strong same-store sales growth into the low-teens.
Not bad for a chain whose CEO at one time had no interest in the restaurant business.
That’s Bill Simon. He was a certified public accountant by training, and was a senior vice president with a large Rent-A-Center franchisee in the mid-1990s. Simon helped the company with marketing, purchasing and real estate. In 1995, he was approached by his friend Scott Redler, who wanted to open a steakhouse. Simon agreed to help, “as a friend.”
But then Simon’s company sold out to its franchisor, and he had some cash and some time. And then Simon and Redler found a site that was so good it caused Simon to change his mind about the restaurant business. “It was killer,” Simon said. “I decided that I wouldn’t pass on it.”
Simon and Redler opened a Timberline steakhouse in Wichita, Kansas, and then opened a few more in the late 1990s. And, of course, once the restaurant business gets in your veins, it’s there for good.
That said, even as they opened steakhouses, their minds started turning to frozen custard. Simon and his brother Randy—currently a 35-store Panera Bread franchisee—had for years been part of family trips to Lake of the Ozarks in Central Missouri, where they’d frequent a local frozen custard stand. And Redler is a native of St. Louis, home to the famous Ted Drewes frozen-custard stand.
The three decided frozen custard needed a place in Wichita. They borrowed a steakburger recipe from the Simons’ father, Freddy, and talked about making shoestring fries and serving Chicago-style hot dogs—things they all enjoyed themselves. “It kind of grew as a lunchtime hobby,” Simon said. They ultimately opened a location in August 2002, and named the chain after Freddy, in part because they liked the alliteration, and because the name sounded like fun.
They gave the concept a nostalgic design, with a red-and-white color scheme and pictures dating to World War II on the walls—Freddy is a veteran of the war.
“It was received nicely,” Simon said. “It wasn’t crazy busy like our stores seem to be now. But it opened nicely, and seemed like it was going to be a success.” They then opened a second location on the other side of town, and “from there, it took on a life of its own,” Simon said. “People were asking us if they could be franchisees, and us saying no and eventually saying yes.”
That “eventually saying yes” part also happened through a bit of good fortune. Ron Oberg’s eldest son came home one night, boasting about the burgers at this place called Freddy’s. Oberg at the time was the president of the Kansas Restaurant Association, and owned a couple of Quiznos locations. He also worked for his father-in-law’s hotel business.
Oberg became enamored with the restaurant. He hung out in the lobby and watched how the restaurant operated. And then in January 2004, Scott Redler joined the board of directors of the Kansas Restaurant Association. After the first meeting, Redler and Oberg started talking about Freddy’s.
By June of that year, Oberg signed a four-unit development agreement. Today, he has six locations, and deals for 12 more. This year, he said, his stores’ sales are up anywhere from 6.5 percent to 13 percent.
Even after Oberg’s first stores were successful, Simon noted they had questions about the brand until a franchisee opened the chain’s first locations in San Antonio. It was so successful, “more successful than any of our other stores—this is when we started thinking this had legs,” Simon said.
The decision to franchise has been a boon to Freddy’s, though that is not by accident. Because both Bill and Randy Simon were franchisees, the company deliberately crafted an operator-friendly business model. The company owns a few locations itself to prove out the concept. But it also keeps profitability as a primary focus.
“We don’t make top-line decisions, or solely top-line decisions,” Bill Simon said. “We make long-term, bottom-line decisions.” He mentioned Burger King’s infamous $1 Double Cheeseburger, a promotion pushed by the franchisor at a time of weak sales, but vehemently protested by franchisees. Burger King ultimately dropped the promotion. “Our franchisees won’t have decisions like that made for them,” Simon said.
The chain has lured an experienced crop of operators, including from chains like Pizza Hut and Applebee’s. And while diners may come for the quality of the food, both Oberg and Simon say something else has kept them coming back: service. They say the service level at Freddy’s is surprising, given that it’s a limited-service business. “People don’t want to wipe down their own table. They can do that at home,” Oberg said. “That’s what I feel separates us from a lot of concepts.”