A Sweet Idea Sells: Candy Franchise

In the fickle world of fashion retailing, Joel Rosenberg found, it can be tough trying to predict the next hot trend in, say, women's shirts. Not so with jelly beans.

Rosenberg, who made the switch from apparel to candy sales a decade ago, has been able to pretty much bank on consumers buying the same chewy caramels and chocolate truffles they bought last year.

Now the president of Candy Express Franchising Inc. is hoping America's penchant for sweets, bulk-food style, will transcend cultures, too. The franchise company has license holders in 20 nations opening dozens of Candy Express stores. Next, it plans to roll out new store designs and spread its name throughout the nation's airports.

"We're selling products that are universally accepted by all ages and genders," Rosenberg said at his Columbia headquarters. "Rich or poor, young or old, everybody likes candy, so everybody is your customer. If people like jelly beans today, they will like them next year." 'When he and brothers David and Michael H. Rosenberg started the chain with four company stores in Maryland and Virginia � all in malls � they knew thy had to appeal to the impulse buyer.

That meant luring shoppers into bright, colorful stores and choices from among 6,000 pounds of candy stored in bins and sold by the pound. For adults, they had gourmet chocolates in refrigerated cases and sugar free lozenges; for children, everything gummy, from bears to worms.

In 1990, the three owners started franchising. A franchisee typically needs between $175,000 and $195,000 to start, which includes as $35,000 franchise fee, $25,000 for the initial inventory and the rest for furniture, fixtures and store construction.

The company continues to get a 6 percent royalty fee on gross sales and a 1 percent promotional fund fee, which covers advertising. In return, the franchisee gets help selecting a site and negotiating a lease, typically for a 1,000-square-foot space. The company also designs the store, plans and buys the initial merchandise, orders and sets up fixtures, provides classroom and in-site training at Candy College at headquarters, trains staff, helps open the store and offers support.

"They're really enthusiastic about helping the franchises," said Christine Lee, one of the first franchise owners, who runs a store in Laurel Center Mall while her husband runs one in Crystal City, in Arlington, Va.

Even recent declining sales, coinciding with a drop in pedestrian traffic at the malls, have not dampened her belief in the franchise, which she said she intends to stick with for the long term. "I think it's a fun business to be in." The company has 40 U.S. franchises, from New Hampshire to Florida.

Average sales for the chain have risen over the past few years, climbing 8.5 percent last year, said Rosenberg, whose company does not release financial information.

"What they're selling hers is not so much the product, they're selling the shopping experience." Said franchise expert Michael H. Seid, managing director of Michael H. Seid and Associates. "They're well-lighted, bright and cheerful," he said of the stores. "They're an opportunity buy, an alternative to something else." The Candy Express outlets have found a niche, he said, a must in the face of competition from other bulk-candy stores, groceries, movie theaters and airports.

Stiff competition is nothing new for Rosenberg and his brothers. Retailing runs in the blood. Their grandfather founded a chain of small department stores in Westminster, Bel Air and Aberdeen called The Hub (not to be confused with Hub furniture store) that was taken over by Rosenberg's father. Growing up, Rosenberg helped his father. The family sold the chain about 15 years ago after his father died.

While at the University of Maryland in 1975, Rosenberg and his brothers started a chain of leading-edge men's and women's fashion sportswear called Cedar Post. They opened the first in College Park, another in White Flint Mall, they expanded to Owings Mills, Columbia and Georgetown.

The candy business started almost by accident. Rosenberg was in Baltimore scouting new Cedar Post locations when he learned a bulk-candy store in a mall he was considering was the third-highest grossing store per square foot.

"I thought, that's a lot easier than what we've been doing, trying to predict what women want to wear in six months," he said.

The brothers tested the concept at Potomac Mills Mall in Virginia, where they arranged for a month-to-month lease. When if proved successful, they sold the clothing chain.

Rosenberg took on business development, real estate and contract negotiations for their new candy company. His brother David directs product development and advertising. Michael Rosenberg handles operations and training.

They opened four company-owned stores the first year, testing the market at an upscale mall � Tysons Corner; a discount center � Potomac Mills; and in the middle market � at Wheaton Plaza in Wheaton and on the Boardwalk in Ocean City.

"We found sales the same in each environment, Rosenberg said. " They cut across socioeconomic boundaries.

He never thought seriously about expanding overseas, until about four years age.

During a franchise exposition, Rosenberg was approached by someone representing a Saudi Arabian prince. The prince was in the market for a business opportunity and had his eye on Candy Express, Rosenberg was told.

He was skeptical at first, but agreed to meet with the potential investor. He met the prince at his Beverly Hills mansion and, five hours later, after discussing families, religion and politics, had a check in his hand. The investor had bought the rights to open Candy Express stores in Saudi Arabia, and agreement that launched the company's international arm The second agreement went to Jusco, a large Japanese retailer that since has opened 15 stores and plans 300 total. Twenty license agreements followed, including franchise in Singapore, Indonesia, Egypt, Mexico, and South Korea.

The contracts offer exclusive rights, usually to large public companies, which agree to open anywhere from two dozen to a couple of hundred stores over five years. The license holder gets the same support as U.S. franchises, everything from site selection to inventory supply.

With each deal, Rosenberg has found himself immersed in a different culture. He learned to talk business first with the formal Japanese, but to talk families before business in the Middle East.

This year, Rosenberg will unveil a new store design he describes as contemporary and sophisticated, mixing bulk candy with boxed chocolates from around the world. He is negotiating agreements with companies that would run stores in airports and train stations.

And he plans a trip to Latin America. "There is a real curiosity and interest in American concepts," he says. "Business people feel if they bring an American concept to their country, it will immediately be a hit."

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