Marble Slab Creamery, Inc.

views updated

Marble Slab Creamery, Inc.

1986: BEGINNING OF THE HANKAMER ERA OF LEADERSHIP

2007: ACQUISITION BY NEXCEN BRANDS

BIRTH OF THE CONCEPT IN HOUSTON

Marble Slab Creamery was founded in Houston in 1983 by Sigmund Penn and Tom LePage. Penn had experience in the food industry having helped expand his family’s New York bakery business into a 55-store operation before moving to Houston where he started a variety of fast-food restaurant chains. LePage, a Minnesota native, had a long career in marketing and sales and was Penn’s neighbor and tennis partner. The two friends eventually agreed to open an ice cream store and, as part of their research efforts, visited several upscale shops, including an outlet of Boston-based Steve’s, considered the first to offer “mixins,” and White Mountain Creamery in Washington, D.C.

In August 1983 Hurricane Alicia slammed into Houston, knocking out power to Penn’s home. The Penns temporarily moved in with the LePages, which gave Penn and LePage an opportunity to test recipes using Penn’s new cone-making machine. Two months later, the partners opened their store, called Cones ’n Cream, at the Carillon Shopping Center in Houston. The store offered rich, all-natural superpremium ice cream, made daily right on the premises, with “mixins” to order folded into the ice cream on a frozen marble slab in front of the customer. The customized ice cream mixture was then scooped into a freshly baked waffle cone. Using a cold slab kept the ice cream hard as the extras were blended in. Sales at the new store grew steadily from $1,100 the first week to $3,000 a week by January 1984 and $5,000 a week by March 1984.

Among the early developments for the nascent operation was a name change. After their application for a trademark on Cones ’n Cream was rejected on the grounds that the name was “too generic,” the cofounders scrambled to come up with a new name. They soon settled on Marble Slab Creamery, though the name later proved misleading. Penn discovered that marble slabs eventually begin to break when they are exposed to a repeated process of being chilled and then warming up, prompting a switch to granite slabs (but not another name change). Less than a year after the first store opened, Penn and LePage began franchising the concept.

1986: BEGINNING OF THE HANKAMER ERA OF LEADERSHIP

One of the first franchisees, Ronald J. Hankamer, played the lead role in the next phase of the company’s history. Hankamer was a partner in a family-owned hotel business, Southwest Inns Ltd., a major developer and operator of Holiday Inns in Texas. From his involvement in this business, he had gained experience with both franchising and the food industry as he was in charge of operations and managed the motels’ restaurants and coffee shops. He became acquainted with Marble Slab in 1983 when it was still known as Cones ’n Cream. His middle-school-age sons had been pestering him to check out the increasingly popular ice cream shop offering premium ice cream and a show to go with it. After taking his whole family to the shop, he was so impressed with the concept that he immediately set out to become a franchisee. He opened his franchised shop, under the Marble Slab Creamery name, in southwest Houston in late 1984. The store enjoyed strong sales from the very beginning and was immediately profitable.

By April 1986 there were 14 Marble Slab Creamery outlets, about half in Houston with the remainder in other Texas cities such as San Antonio and Galveston, as well as Tulsa, Oklahoma; and Ames, Iowa. By this time, some of the franchisees were becoming concerned about food costs, and Hankamer had concluded that a greater emphasis on store operations was needed for the franchises to thrive. He therefore approached the company founders about buying them out. Penn and LePage agreed to sell the business to Hankamer and his family for around $250,000.

Among the key early changes that Hankamer imposed was to alter the franchisee training program to unify and standardize the stores. After consulting with an interior design firm, he began allowing franchisees to choose from just three standard color schemes. He also conferred with restaurant consultants to develop plans that helped franchisees schedule their employees so as to lower their labor costs. By stepping up the chain’s expansion, Hankamer created a larger overall system that provided franchisees with more clout to negotiate lower food costs from suppliers. Growing exclusively through franchising, Hankamer concentrated initially on the Sun Belt, where people eat more ice cream, closing locations that had been opened in farther-flung locales, such as Iowa. By 1995 the chain had reached the 50-unit mark, with locations in Texas, Louisiana, New Mexico, Arizona, and California. Around ten more stores debuted in 1996, including the first in Florida. Most of the Marble Slab Creamery outlets at this time were located in strip shopping centers, with about a quarter found in enclosed malls. In 1997 systemwide sales jumped 30 percent, reaching $13 million.

COMPANY PERSPECTIVES

Since 1983, Marble Slab Creamery has set its standards of quality unusually high. Every batch of our superpremium ice cream is homemade, and we hand-roll our freshly baked waffle cones in each store. As for mixins, we offer only the freshest fruits, the finest nuts, the sweetest candies, and the yummiest cookies around. So whatever your order, you can be sure it’s fresh and filled with fabulous flavor.

LAUNCH OF PERIOD OF ACCELERATING GROWTH

In the late 1990s and into the early 21st century, Marble Slab accelerated its growth, spreading into additional states in the Southeast, Midwest, and Southwest. By the end of 2000 there were 179 Marble Slab Creamery outlets in 21 states. Systemwide sales had surged to $30 million, while the company itself was generating revenues of $2.1 million. All of the stores were franchised except for the original location in the Carillon Shopping Center, which remained company owned. This locale, situated just three city blocks away from the corporate headquarters, served as a research and development test center as well as a franchisee training facility. Hankamer continued to place great emphasis on the quality of the ice cream. The ice cream was made at seven independent dairies, which distributed an ice cream base to the stores, where flavorings were added and the ice cream was refrozen. Hankamer also instituted a rigorous inspection program through which field supervisors were charged with carrying out unannounced store visits to evaluate cleanliness, quality, and service. On the marketing side, the company supplemented word-of-mouth advertising with billboard and radio advertisements, and because many of its stores were in shopping centers with movie theaters, it increasingly used movie-theater onscreen ads.

By mid-2001 the Marble Slab system had reached 200 units. Over the next several years, the company opened around 30 additional franchised outlets each year, including the first stores in Canada and the United Arab Emirates. The company took a conservative approach to international development as Hankamer believed that a too-rapid expansion could prove to be a recipe for failure. In 2003 Marble Slab sold a master franchise for all of Canada to a Calgary-based company in a deal calling for the development of at least 70 units north of the border over a 30-year period. Two years later a firm based in Dubai was selected to open a minimum of 50 stores across the Middle East.

Also in the early 2000s, Marble Slab began marketing more toward children, introducing a kids club and a cartoonish mascot named Slabby who personified an ice cream cone. Competition in the hand-mixed, superpremium ice cream category was heating up at this time. Stone Cold Creamery, a chain founded in Scottsdale, Arizona, in 1988, surged past Marble Slab into the top position, with more than 500 units and systemwide sales of $155 million in 2003. Since its founding in Kansas City, Missouri, in 1989, MaggieMoo’s International, LLC, had opened more than 100 stores, achieving 2003 systemwide sales of nearly $30 million. By comparison, the 300-unit Marble Slab generated systemwide sales of $60 million in 2003, an increase of nearly 43 percent over the previous year. Also that year, Marble Slab introduced an overhauled store design for its new units featuring an upscale interior that was chosen to better match the quality of the company’s product. The 1,200-square-foot design incorporated softer colors, graphic imagery, and enhanced lighting, and it created a “slab theater” at the front of the store to entice shoppers inside. One other noteworthy addition was an open shelf, located about 5 feet above the counter, filled with the chain’s signature mixins ingredients.

In 2004, as the company made a major push into California and began moving into the Northeast as well, Marble Slab launched its first major television advertising campaign. The spots emphasized the quality and freshness of the chain’s ice cream as well as the showy way in which its ice cream concoctions were created. The freshness angle was promoted by noting that the milk in its ice cream had no additives and the product went from cow to counter in ten days.

KEY DATES

1983:: Sigmund Penn and Tom LePage open an ice cream shop in Houston called Cones ’n Cream; the name is later changed to Marble Slab Creamery.
1984:: Franchising begins.
1986:: The cofounders sell the company to franchisee Ronald J. Hankamer and his family for $250,000.
2001:: Store count reaches 200.
2007:: Marble Slab Creamery is sold to NexCen Brands, Inc., for $21 million.

2007: ACQUISITION BY NEXCEN BRANDS

The steady growth at Marble Slab Creamery continued as systemwide revenues surged to approximately $90 million by 2006, when the store count exceeded 350 units and the chain’s reach extended to 35 states, Canada, and the United Arab Emirates. In February 2007 Hankamer sold the company to NexCen Brands, Inc., for $16 million plus an additional payment of $5 million in either cash or stock due one year later. NexCen simultaneously purchased MaggieMoo’s for $16.1 million in cash and stock. Based in New York City, NexCen evolved out of Aether Systems, Inc., one of the once-high-flying casualties of the dot-com bust. In 2006 NexCen began focusing on brand management, seeking to acquire and manage consumer brands in industries in which intellectual property played a central role. The company purchased franchise-based footwear retailer Athlete’s Foot Brands, LLC, that year and clothing designer Bill Blass Holding Co., Inc., early in 2007. Its acquisitions of Marble Slab and MaggieMoo’s were its first within the quick-service restaurant sector.

NexCen’s executives had no immediate plans to change either chain, although they saw some synergies between the two brands in operational areas, such as back-office functions. They envisioned Marble Slab and MaggieMoo’s both continuing their plans of expansion as the two concepts had established their own niches within the hand-mixed, superpremium category: Marble Slab was positioned as more “adult and sophisticated,” while MaggieMoo’s was “more for kids.” For Marble Slab, which at the time of the acquisition had about 165 stores under development, its new ownership was likely to mean a bigger marketing push and an increased emphasis on overseas expansion. NexCen planned to leverage the international franchise network of Athlete’s Foot, which extended to 40 countries, to the benefit of its newly acquired ice cream chains.

David E. Salamie

PRINCIPAL COMPETITORS

Cold Stone Creamery; International Dairy Queen, Inc.; Baskin-Robbins; Friendly Ice Cream Corporation; Ben & Jerry’s Homemade Inc.; Carvel Corporation; Bruster’s Real Ice Cream, Inc.; Dippin’ Dots, Incorporated; W. H. Braum, Inc.