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Einstein Noah Group's Kevin Kruse, at left, visits Springfield to help franchisees Terry Reynolds, Paul Sundy, Jay Hickman and Rita Baron select a second Springfield location.
Einstein Noah Group's Kevin Kruse, at left, visits Springfield to help franchisees Terry Reynolds, Paul Sundy, Jay Hickman and Rita Baron select a second Springfield location.

The Franchise Formula

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Springfield’s first Einstein Bros. Bagels franchise wasted no time turning the heads of its corporate owners.

The South National Avenue store operated by franchisee RT Development LLC recorded the highest opening week sales for a franchise opened in 2010. The ownership group – comprising Rita Baron of Baron Design & Associates LLC, Terry Reynolds of C. Arch Bay Co., and restaurant and nightclub owners Paul Sundy and Jay Hickman – was recognized Sept. 1 during the Lakewood, Colo.-based franchisor’s franchisee summit.

Continuing the momentum, Springfield-based RT Development now plans to enter a new market, targeting an end of October opening of an Einstein Bros. on Michigan Avenue and Lake Street in Chicago.

The group owns the Einstein Bros. franchise rights for Greene and Christian counties, where it intends to open three more stores by 2013. The Springfield store opened July 13 at 1933 S. National Ave.

The partners have a new agreement in place – under the name RT Development Chicago LLC – with franchisor Einstein Noah Restaurant Group Inc. (Nasdaq: BAGL) to open five stores in Chicago’s downtown financial district.

“Corporate always owned Chicago, and they had no desire to give any out of their territory,” Baron said. “That just tells you what Springfield people can negotiate.”

Andy’s Frozen Custard owner Andy Kuntz also is making a Chicago connection with the Sept. 30 opening of a Windy City store at 108 N. State St. in the Block 37 development.

One difference is that Kuntz is a franchisor opening a corporate store.

The Springfield-based company sold its first franchise location 19 years after its founding in Osage Beach. That franchise opened in Rogers, Ark., in 2005, and now there are seven Andy’s franchise locations with 15 current stores in Missouri, northwest Arkansas, Texas and Illinois.

Not reinventing the wheel
Baron declined to disclose terms of the Chicago franchise agreement, as well as first week-sales at the Springfield store, citing corporate policy, but she said seven franchises have opened this year. She noted the standard expectation is that franchisees would open one store a year until their agreement is fulfilled. RT Development hopes to get ahead of that curve, she said.

“In Springfield, we’re hoping we will open two in 2011, but there will be one definitely,” Baron said.

Einstein Noah representatives were in Springfield Sept. 14–15 scouting locations with Baron and her partners.

Corporate support is a large benefit to franchising, said John McKearney, a Springfield-based counselor for the U.S. Small Business Administration’s Score program.

“The operating program is provided by a franchisor,” he said. “If you have a pet supply store and the franchisor gives you the state of Missouri, you could replicate stores across the state fairly quickly because you have all the marketing materials, the advertising and signage provided to you.”

Operational support is a benefit to franchisees – and possibly one of the largest ongoing challenges franchisors face, Kuntz said.

“The challenges for us were that we had to communicate what we do, who we are and what we’ve been for the past 23 years to franchisees,” Kuntz said.

When selling franchises, Kuntz said a compatible business philosophy is more important than meeting financials. “We’re more concerned about who they are and how they’re going to run the store, versus where the money is coming from.”

Baron said RT Development spent a good deal of time under the Einstein Noah microscope before they were offered an agreement. The 700-store company – roughly 430 of which are franchise locations – reported second-quarter revenues of $204 million and 17 percent franchise and license revenue growth between June 2009 and June 2010.

“They don’t want any stores not to make it,” she said. “They come and give their blessing for sites. I’m glad because they’re paying attention.”

New town, new rules
Before expanding into a new market, McKearney advises business owners to take a look at their existing business, to make sure it’s healthy and meeting its strategic goals. If all is healthy on the home front, he said the next step is to analyze the new market’s need for the product or service.

“You have a customer base in Springfield that you’ve identified and developed products and services that meet those customers’ needs,” he said. “If you’re going to Kansas City or Branson or Rolla, you need to reconfirm that there’s a need for those products and services there.”

Since Einstein’s already has an established presence in Chicago – there are 13 inside the city limits, according to, Baron said she’s confident there is already a customer base for the new stores.

“People say they love Einstein Bagels, but the problem is that they don’t have one nearby,” she said. “Now, we’re trying to find the right sites, to capture that foot traffic.”

Andy’s Frozen Custard has been in the Chicago area since 2006, said Kuntz, who is opening his first downtown store.

The biggest difference between Springfield and Chicago, Baron and Kuntz agree, is the densities – parking and car traffic are priorities locally, they said, while foot traffic is much more desirable in downtown Chicago.

“Locationwise, you can’t put on the same hat and look at it from the same point of view,” Kuntz said. “You’re going to be limited with that kind of attitude.”

Kuntz finds the location of his newest store important enough that he said he’s not concerned about signing on to a development that has a Chicago-area reputation similar to Springfield’s Heer’s building. A minimum of six real estate developers have unsuccessfully tried to develop Block 37, and Bank of America is foreclosing on the property after current owner Joseph Freed & Associates defaulted on a $173 million loan, according to a Sept. 22 report in the Wall Street Journal.

“I don’t see that building going dark,” he said.

Block 37 sits across from Macy’s department store, which was once the home of Chicago landmark retailer Marshall Field’s, and 500,000 people work within a half-mile radius of the development.

The custard shop is situated in Block 37’s underground “pedway,” part of a six-mile walkway with subway lines at each end.

“The red line is on one end, and the blue line is on the other,” Kuntz said. “There are 125,000 people a week that walk through there. It’s in too great of a location for it not to be a success at this point.”[[In-content Ad]]


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