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Growth Path Seen for HoneyBaked Ham Franchisee

The Irvine-based franchisee of HoneyBaked Ham’s California locations has room to grow, according to a recent state regulatory filing.

Also pushing prospects for growth for the chain in California: a deal reached earlier this year among the previously divided operations of the HoneyBaked brand, which have merged into a national chain.

The “notice of exemption” recently filed in California allows HoneyBaked Ham Inc.—which oversees 36 locations in the state from a small headquarters building it owns on Musick Street—to operate locations of the holiday meat retailer and cafe in California.

“You only file this if you have something in the pipeline,” said a franchise attorney.

A 2004 franchise filing by the same Irvine operator had allowed it to “sub-franchise” locations to others, as well as potentially open its own units.

But the required annual renewals hadn’t been filed since, according to state records.

“It’s safe to say they [hadn’t been] selling franchises in California,” the attorney said.

The latest filing could reaffirm parts of the company’s 2004 status and give it leeway to grow more.

Trade magazine Meat & Poultry said in June that the California operator was already licensed for up to 40 locations total.

Any increase in California will come under the brand umbrella of new corporate parent HoneyBaked Ham Co. LLC, formed by merging companies in Troy, Mich.; Mason, Ohio; and Alpharetta, Ga., where the company is now based.

The three entities had similar names and were independently run for many years by descendants of company patriarch Harry Hoenselaar, who died in 1974.

A fourth company, in Massachusetts, was purchased in 2012 by the Georgia operator.

The California franchisee declined by email to be interviewed; the parent company in Alpharetta through an outside spokesperson couldn’t be reached.

National

HoneyBaked Ham Co. LLC has about $500 million in systemwide sales, according to a recent news report, and about 425 U.S. locations in 40 states, according to its website.

It’s also expanding overseas and opened its first location in Japan in June under a deal with Toranomon Ham Co., led by a former Starbucks Corp. executive and backed by FinTech Global Inc. in Tokyo.

A U.S. employee count of about 1,500 can swell by 10,000 part-timers to handle holiday sales: 70% of sales come at Thanksgiving, Christmas and Easter, former Chief Executive Chuck Bengochea said in a June 2013 New York Times article.

The chain added a cafe concept by about 2001, offering premium coffees and breads in the cafes, along with online ordering and other efforts aimed at developing a year-round business for its locations.

HoneyBaked Ham franchises began to be available in 1998, according to Entrepreneur Magazine, which ranked the franchise No. 166 on its “Franchise 500” in January.

The publication, also based in Irvine, said about 55% of HoneyBaked Ham locations are company-owned.

It said a franchise costs about $282,000 to $436,000 to open.

The franchise fee is $30,000 with royalties of about 5%.

The Specialty Food Association in New York City said retail sales of specialty food—a category that includes premium protein such as these ham and turkey products—grew 19% from 2012 to 2014, hitting $86 billion in 2014 and far outstripping a 2% gain in food sales overall.

Growth

Harry Hoenselaar bought the company from his employer in 1957 for $500—which would be about $4,300 today. He held at least one patent for a spiral meat slicer.

The company grew based on that intellectual property and a reputation for a premium product, according to a trade journal profile of the company in December.

It has bought competitors, including Atlanta-based Hickory Ham Co. in 1998, which added about 50 locations to the chain, the Wall Street Journal said, and Heavenly Ham, also in Atlanta, in 2002, which had 216 locations, according to Entrepreneur.

It was called out by Entrepreneur in 2010 as the 45th fastest-growing franchise.

A remaining competitor, Logan Farms Honey Glazed Hams & Market Cafe in Houston, started in 1984 “when the local honey-glazed ham store wouldn’t let (James Logan) pay by check or credit card,” Entrepreneur said.

Logan Farms has 10 locations in Texas, Mississippi and Louisiana, according to its website.

Family

Hoenselaar’s four daughters began operating four separate companies in four states after he died.

Patent protections expired in the early 1980s, competition grew, and HoneyBaked Ham began to expand its retail locations, reports said.

The company is headed by Chief Executive David Keil. Keil most recently helped shepherd a merger involving Ecolab Inc., a food safety and water treatment company in St. Paul, Minn.

Before that he helped sell franchises for Minneapolis-based Haagen-Dazs Shoppe Co. and worked in sales and finance for Plano, Texas-based Frito-Lay Inc.

The separate companies that existed prior to the recent merger were run by Hoenselaar’s grandchildren in several families. Family members own the new LLC and sit on a new corporate board, which also has three independent directors, according to a number of news reports.

President Craig Martin led the Irvine operator at the time of its 2004 filing; its current president is Thad Martin.

Its headquarters on Musick Street in Irvine is about 5,500 square feet, CoStar Group records show.

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