Rita's CEO sees Philadelphia's water ice chain as a global business

At the original Rita's Water Ice store, on Bristol Pike in Bensalem, in 2005. Now, Rita's CEO Jonathan C. Fornaci is busy taking the chain global, and says that "we've made significant changes to the business model" to help franchisees. The first Rita's was opened in 1984. BONNIE WELLER / File Photo
At the original Rita's Water Ice store, on Bristol Pike in Bensalem, in 2005. Now, Rita's CEO Jonathan C. Fornaci is busy taking the chain global, and says that "we've made significant changes to the business model" to help franchisees. The first Rita's was opened in 1984. BONNIE WELLER / File Photo
Posted: June 11, 2012

Bob Tumolo, who opened the first Rita's-brand summertime water-ice shop in 1984, was a city firefighter from South Philly who sold out, after 20 years, because growing the chain made him tired. And selling it made him rich.

Jonathan C. Fornaci, who now runs the 600-store, $140 million-plus (yearly sales) franchise chain from Trevose, has had a career that reads like energy personified: He's a Berkeley-trained physicist, founder of a Silicon Valley venture consultancy (Atomic Tangerine), a former General Electric executive, Peruvian gourmet-restaurant owner, and West Coast pizza-chain boss.

He's taking Rita's global, and he hopes to sell it for its owners, in a few years, for a fat profit. Since taking over last winter, Fornaci has signed deals to open dozens of new Rita's in China and India, California and the Dutch Caribbean isles — while cutting franchise costs to boost store profits in Rita's East Coast heartland.

Fornaci hadn't known Italian-American-style, made-fresh-daily, fruit-flavored water ice from Sno-Cones. What is this? he wondered, when New York-based Falconhead Capital L.L.C. — which bought Rita's Franchise Co. from Pittsburgh's Rudolph brothers (they bought from Tumolo in 2004) for somewhere north of $40 million — asked Fornaci to leave Straw Hat Pizza and run Rita's.

"And I try it, and I'm, like, ‘Wow,'?" he told me. Smooth, "sweet, bright-colored, cool, fruit — they'll love it in Shenzhen, in Mumbai" and in Latin America, where ice-and-custard Rita's Blendinis present a soft twist on popular paleta snacks.

Last month, Fornaci signed Rita's development agreements with Parvin Juneja's South Asian Food & Hospitality Pvt Ltd., an operator of Quiznos hoagie stores and other chains in India, and with Madam Xu Xue Ling's Shenzhen Xing He Feng Trading Co., which runs Subways in south China.

He's also had to make friends close to home. The Rudolphs' plans to go national and turn summer walk-up windows into year-round sit-down restaurants stalled in the recession. (They sold at a profit and retain a minority interest.)

Already "we've made significant changes to the business model," Fornaci told me. "We had been charging $250,000 to $350,000 to open a single store."

Since easy credit dried up, "we changed the model to $150,000 to open a full-production store, and add three or four satellites — a hub-and-spoke model — for $50,000 to $75,000 each," he said. "That makes stores [profitable] in a year, or less."

Rita's helped finance $40,000 trailers to franchisees like Berks County's Dianne Newkirk so she could work ballgames and county fairs.

Rita's still controls the product: fruit syrup from Philadelphia's I. Rice & Co., South Jersey frozen custard, in-store mixing and pumping equipment. "The difference is, this management is really listening to the franchisees, that what works in Poughkeepsie might be different from what we need to do in central Manhattan, or the Jersey Shore," says Josh Teitelbaum, owner of the Manhattan Rita's at 94th and Broadway, and a member of Rita's franchisee council.

Fornaci eased the chain's bans against weekend-only hours, store banners, employee tip cups and other custom features: "It would be arrogant for me to think I'm smarter than the local franchisee. If it makes sense in your community, do it." And he replaced old radio ads — "Who listens to radio?" — with HD-quality, Philly-cast national cable-TV ads that appealed to store owners and "our customers — soccer moms and dads on weekends, taking kids to celebrate."

Metro Banks advance

Vernon Hill's fast-growing Metro Bank, in England, has raised an additional $200 million from past and new investors.

Separately, Harrisburg-based, Hill-backed Metro Bank, a onetime franchise of Hill's former Commerce Bank, was freed last week from a restrictive spending order by Pennsylvania regulators. Pending federal approval, Metro plans branches in Chester, Montgomery and Bucks Counties, boss Gary Nalbandian told me.

Both Metros are on Hill's Commerce model, with well-staffed branches, open late, moving crowds fast. If they keep boosting capital, they'll make money — once interest rates rise.

Read Joseph N. DiStefano's blog at www.philly.com/phillydeals. Reach him at 215-854-5194, JoeD@phillynews.com, @PhillyJoeD.

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