Is Rita's Italian ICE a good tenant?

[John McKee]

Looking for anyone who has any experience with this franchise as a tenant.  Seems a bit seasonal to me but if the annual numbers are good on an average store then it might be worth it.

[Kenneth Woodruff]

I am a former franchise owner (2 stores in NC) and I can tell you they are seasonal and from our experience opening in in NC (Franchise started in PA and is better supported there) there were major challenges.  We had them for 2 years and it almost broke us, they just aren't received as well outside on PA.  

If you are talking with an existing owner who wants another or a new location the risk is much less than a new franchisee. The franchise itself is awesome, stores are clean and they are required to keep them and the surrounding area clean.  The threat will be if they cashflow enough to handle the debt.  Average store gross is $275k as a whole, we were in beach locations and only did slightly more than that, which killed us.

plus side is they need very little space (800sq/ft to operate), so you may be able to split a property and have more than one Tennant to offset risk.

Good luck

[John McKee]

Great feedback!  Those are some lousy gross sales #s, but like the idea of giving them a shared space.

[Bruce Lynn]

My guess is you're not signing with corporate, you're signing with a franchisee.   So your lease is not top rated national tenant like a Starbucks, but more likely a local person, just about like 80% of the other businesses in your town that have franchises.

I'm sure it is seasonal....not sure if anyone does this, but might think about their sales numbers....charge more rent in the summer months and less in the winter....perhaps depending on lease start date.  Let's say you start in March, might collect more rent up front thru Sept/Oct....and then if they run out of cash by Jan, you're not left holding 2-3-4-5 months of full rent....it would be the reduced rent.   To me that might be a win-win too if they are not strong franchisers or business people.

I really don;t know much about them other than I am in Texas.  I did a trade show one day and was glad I was next to them.  Very very few people wanted to talk about real estate, but I heard a lot of screams when they saw the Rita's booth.  I had never heard of them...but they were probably the #1 booth there....it was a franchisee giving free samples on a hot day...and telling people where his stores were.  Seemed to be more of a NE USA thing, but at least one of his shops is still in business...4-5 years later.

I would want personal guarantee if you can get it.  Have that conversation with them too....that they're personally on the hook if the business doesn't work out...until you can get it released at full price.

[Joseph Gozlan]

@John McKee Let's take this discussion a step higher and change the question to "is franchise X a good tenant?"

The answer depends on a few critical factors:

1) Who guarantees the lease? The corporate or the franchisee? What's financial strength of the guarantor (either way) if the owner of that franchise is Mark Cuban and he personally guarantees the lease, do you even care what the franchise is selling?!

2) Assuming it's not a local billionaire,  what's the operator's experience? Is it their first business? 50th location? side hobby of a SW engineer's wife? a lot of factors to figure out about the actual guarantor. 

3) Research the franchise. What's their success rate, average franchisee annual take home, what kind of support the corporate gives the franchisees, etc.

4) How does franchise X fit within your location? I don't know if an ice-cream franchise is a good fit in Alaska or a Wool sweaters is a fit in Hawaii.

5) How does franchise X fit with the rest of your tenants (assuming it's a retail strip of some sort) a pizza franchise in a strip mall that already has a pizza place will compete with each other and will eventually cause one of them to lose their business and you to lose the tenant

Just some food for thought.