Nekter Juice Bar Inc. plans to push franchised locations under a growth program it will roll out in January after three years of selling such sites mainly to the juice-and-food chain’s few early franchisees.
Santa Ana-based Nekter has 54 stores; 40 of them, or 74%, are company-owned.
It sold five franchises in the first two years after its 2010 launch. Those operators have since added six, and a new franchisee joined in November when it bought three company-owned locations in Texas.
“We weren’t ready to sell more until we had the controls in place,” said Steve Schulze, who co-founded the company with wife, Alexis. “You have systems that are 95% franchised, and that’s not where I want to be.”
A 70-30 split is Nekter’s aim.
It has 15 leases signed for new corporate sites—construction starts on a South Coast Plaza location next month for a February opening—and 14 franchised stores are under contract, “with a wait list as we release further locations and regions.”
The 29 new locations will move the needle to 83 stores, with about 66% of them company-owned, Schulze said.
Average unit volume is $855,000, the franchise fee is $35,000, and royalty and marketing are 8%. It costs $220,000 to $420,000 to open a location.
Systemwide sales are about $46 million.
Branching Out
More than two-thirds, or 38, of Nekter’s 54 locations are in California.
Arizona has nine Nekters, Texas has three, and Nevada and Colorado each has two.
The company early on thought it couldn’t control quality in other states through franchises, so it opened its own stores in those markets.
“We were too young” to leave out-of-state operations to others, Schulze said.
Now Nekter embraces the idea that “an owner who lives in that area” can run locations more efficiently.
Texas is marked out for franchising. Nekter is considering selling its two company-owned Colorado locations and is talking to a franchisee who would handle Utah—a new state for the company.
The 15 corporate locations it has signed for next year are in California, Arizona and Nevada.
A developing map shows a Southern California core flowering out to Phoenix and Las Vegas as franchised locations take root at the periphery in states twice removed from here and in untapped parts of California.
An operator of 11 Subway sandwich shops in the Inland Empire had an infrastructure Schulze trusted, so Nekter plans to open seven franchised spots in that region. A new franchisee group plans three locations in Sacramento.
Brand Believers
The Schulzes stood pat for two years, watching the early franchises.
“We wanted people who believe in our culture, believe in our brand,” Steve Schulze said.
The company spent $500,000 to develop the plan before it was ready to pursue franchising in earnest.
A study for Nekter by iFranchise Group—which is based in Homewood, Ill., and has an office in Irvine—shows potential markets, employees needed, and other elements to serve as “a roadmap for the next 36 months.”
Nekter also recently staffed up corporate ranks with Starbucks Corp. and Chipotle Mexican Grill veterans, debuted a redesign of its stores this year, and plans to expand its corporate offices from a current 10,000 to 15,000 square feet by April—about the time the systemwide worker base, including franchises, tops 1,000.
Schulze said a compounding effect on unit growth could kick in by 2017 as Nekter adds staff, markets and franchisees, but “I don’t have any interest in 50 or 100 franchised stores next year.”
Some employees could also become franchisees one day, he said: Nekter is in the early stages of planning a franchise-finance deal with Opus Bank in Irvine.
Employees who have at least 25% of the $35,000 franchise fee would have the balance covered by the chain’s longtime lender and guaranteed by Nekter.
