Rita's CEO has lofty dreams for water ice

When Jim Rudolph and his brother, Bill, bought Rita's Water Ice in May 2005, they were stunned by the amount of attention they got.

"You have to remember, I'm not from Philadelphia," said Jim Rudolph, now Rita's chief executive officer. "I'm from Pittsburgh."

Rudolph didn't realize how popular Rita's was in the Philadelphia region, where it had been founded in 1984 by a firefighter trying to supplement his income.

But McKnight Capital Partners - the Rudolph brothers' investment firm - didn't buy it for the strong Philadelphia connection. They bought it to expand far beyond the Mid-Atlantic region.

"Who says this can't travel?" Rudolph retorts to skeptics who say that people outside the region have no idea what water ice is.

Rudolph - described by franchisees as passionate, tireless and intense - has lofty goals for Rita's: He wants to have 1,500 stores by 2010, up from 319 when he bought it, and $500,000 in average annual sales per store, up from $225,000 last year.

Full-time employment at Rita's Water Ice Franchise Co. L.L.C. has climbed from 42 at the time of the sale to 83 now. That does not count the thousands - mostly part-time workers - employed by franchisees. Last year's sales at Rita's outlets totaled $73.7 million, the company said. So far this year, they are up 5 percent, Rudolph said.

To meet the 2010 store goal, Rudolph has stepped up the pace of openings, going from 33 in 2005 to 68 last year. This year's goal is 135 stores. As of last week, 45 had been opened this year, giving the company 451 stores, Rudolph said.

There were about 20 things Rudolph said he was trying to do to meet his ambitious sales-per-store goal. First among them is a steady flow of new products, such as this year's Blendini, which contains bits of Oreos or Nilla Wafers.

"We want 'new' all the time," Rudolph said. He and franchisees said the Blendini was the first new Rita's product since 1998, with the exception of Rita's Squeezers launched in 2005 for supermarket sales.

Perhaps most significant is a change in Rita's culture, with Rudolph's leaving behind the model of Rita's as a part-time mom-and-pop business.

"We're trying to get a more engaged partner to be involved in this business," Rudolph said. Like other fast-growing franchisers, Rita's is signing more franchisees to multistore deals, including a five-store deal last week in Jacksonville, Fla.

That means Rita's is signing franchisees with more business experience and much more money than the typical franchisee of five years ago. At the same time, the company, which in April moved its headquarters from a cramped building in Bensalem to a 12,000-square-foot facility in a Trevose office park, is demanding more from existing franchisees.

"They've raised the bar in the franchise community to run better stores," said Mitchell Cove, who has been a Rita's franchisee for 18 seasons and has four stores in Northeast Philadelphia and three in Bucks County. "It's been a challenge, but they are kind of keeping us on our toes more."

Rudolph has increased the number of franchise service managers, who are constantly on the road visiting stores and working with franchisees. The increase - from seven, or one for every 46 stores in April 2005, to 13, or one for every 35 stores now - means each franchisee gets more attention.

Cove said Rita's had instituted a more rigorous secret-shopper program, with store visits twice a month compared with twice a year under the former owners.

Rudolph has also brought in systems and policies from his former life as a Wendy's franchisee, said Dave Wheeler, who has three stores in Mercer County. It's more organized and "less winging it, if you will."

The change Wheeler likes best is the company intranet. "I used to get a stack of paper every Saturday," Wheeler said. Now, all the invoices and other communications, including training for employees, are online.

Wheeler, who has been with the company for 15 years, acknowledged that it had been hard for some franchisees to adjust to Rudolph's style, which is much more intense and demanding than that of the previous owner. "It's not like he's asking people to do things and not spending his own money."

Another veteran franchisee, Dan Reyes, who has seven stores in Philadelphia, said he had appreciated Rudolph's emphasis on new products, especially custards.

"That will help us out toward the beginning and the end of the season," because people eat ice cream throughout the year and think of water ice as a hot-weather treat, Reyes said.

Reyes and other franchisees are skeptical about some of the things Rudolph is trying to do. For example, they do not see how the company can reach the goal of $500,000 in annual sales per store, and they are not sold on the idea of indoor service.

Rudolph is convinced that the company has to go in that direction to compete with Cold Stone Creamery, Häagen-Dazs, Ben & Jerry's and Carvel. His ideal store would have a walk-up window, a drive-through, and walk-in service.

Those competitors are also open year-round - but Rudolph has not decided how far to push that.

In the meantime, he sees plenty of ways to improve the business. A simple one is to give out samples.

"When we bought this, they didn't sample," he said. That's a problem when you're selling something people don't need. "We've got to remember," Rudolph said, "this is a treat."

Running Rita's has turned out to be an unexpected treat for Rudolph, 57, whose family once owned 47 Wendy's and six Chuck E. Cheese locations. He and his brother also own four million square feet of office space and four bowling centers.

After buying Rita's, Rudolph said, he figured he would spend two or three months here to learn the business and get it organized. Then, he thought, he would come back once a month to check in.

Instead, after a six-month lease on an apartment in Bensalem ran out, he bought a condo in Old City and works here Sunday through Thursday every week.

"I never expected in my life," he said, "to enjoy something as much as I enjoy this."