Franchising

Kelly Fairbrother

June 1, 2014

OL-640

Meadowlands Homemade Ice cream:

A Franchise Opportunity

Summary

“I scream, you scream, we all scream for ice cream!”. This popular phrase about the sweet dessert are lyrics to a song recorded in 1929 by a band named Waring’s Pennsylvanians TurkeyHill 2010). Today, people are screaming for Meadowlands Homemade Ice Cream in Tewksbury, Massachusetts. As a nation, we are eating increasingly more ice cream each year. In 1899, there were about five million gallons of ice cream that was produced. In 2000, that number grew to sixteen hundred and fifty million gallons. It is estimated that America enjoys close to six gallons of ice cream per person, each year. This is more than any other country (Riverdeep 2002). In 2011, over one and a half billion gallons of ice cream was produced and the industry generated ten billion dollars of revenue in 2010 (Ayles 2013). Despite the recent trends for healthy diets, people still have a hankering for ice cream.

Meadowlands Homemade Ice Cream, is a consistent contributor to this growing industry. Their delicious and classic flavors gives this quaint stand the loyal customer base and high annual revenue it has. It has created a niche in the market and has many features that make it a great opportunity to be franchised. Porter’s Five Forces can explain the niche Meadowlands has created in the market. From the rivalry of the competition, barrier to entry, threat of substitutes, and bargaining power of the buyer and supplier Meadowlands has a niche in the market. There are few true competitors, only one strong substitute and insignificant barriers to entry. Since Meadowlands is an already established, profitable business, there is an advantage and a stronger opportunity to become a franchise. This is just one of the strong features Meadowlands has to become a successful franchise.

Given the research of the ice cream industry and the facts of Meadowlands, I would invest in Meadowlands Homemade Ice Cream. Personally, I am a very loyal customer and it is the only ice cream stand I visit. I have often daydreamed about the possibility of investing or owning Meadowlands and wished there were more locations. I chose this business as a franchise opportunity. I am not only passionate about the product but the facts show Meadowlands could be a very successful franchise. I would invest in the Meadowlands franchise.

Critical Points

Meadowlands has been serving homemade ice cream since 1964. They offer twenty-three ice cream flavors, five hard yogurt flavors, three soft yogurt flavors, five sherbet flavors, two flavors with no sugar added, seven different ice cream pies, and six different ice cream pizzas, cowpies, and cupcakes. The menu does not stop here. They also offer hot dogs, chili dogs, chili, chips, water, and coffee. An additional feature to this stand is what a customer can take home. The staff will hand-pack ice cream or yogurt into pints and quarts for their guests as well as pints of toppings (Meadowlands 2014). At their end of the summer sale, where everything is half price, people line up in order to fill their freezers with pints and quarts of their favorite ice cream. It is a quaint stand with a peaceful and enjoyable backdrop. With a spacious parking lot in front and picnic tables on the meadow behind, people are encouraged to stay and enjoy their ice cream.

The real focus behind Meadowlands Homemade Ice Cream, is right in the name of the business: homemade. The ice cream is homemade and then hand-packed to each order. The flavors and taste of the product truly reflect this. While some ice cream stands and parlors offer new complex flavors, Meadowlands menu seems as though it hasn’t changed since they opened. Simple and classic flavors such as chocolate, vanilla, strawberry, chocolate chip, and coffee make up the majority of the menu. While they do have cookies and cream, mint chocolate chip, and rocky road, they do not have flavors such as cotton candy, cheesecake, or birthday cake. This is one of the reasons, Meadowlands is a great opportunity for a franchise. They have classic flavors that they make extremely well. They are not concerned with creating over one hundred different flavors of ice cream. The classic flavors are what people want and is what has so many people comes back to this business.

In 2012, vanilla was the number one most popular ice cream flavor with a share of almost thirty percent. Chocolate was in second place with only nine percent. Butter pecan, strawberry, Neapolitan, chocolate chip, French vanilla, cookies and cream, vanilla, fudge ripple, and praline pecan round out the top ten most popular ice cream flavors of 2012 (Ayles 2013). Three of the top ten flavors are vanilla based flavor. Also, out of the top ten less than half have a topping mixed into it. The popular and top selling flavors are classic, Meadowlands specialty. This industry is a billion dollar business and growing. In 2010, the industry generated ten billion dollars of revenue and in 2011, more than one and a half billion gallons of ice cream was produced (Ayles 2013). Americans are responsible for consuming an average of six gallons, per person, per year. This is more than any other country (Riverdeep 2002). Meadowlands accounts for a portion of this. According to Manta Media, a website that promotes and connect small businesses, reports that Meadowlands has an annual revenue of five hundred thousand to one million dollars (Manta Media 2013).

Not only are people in the Tewksbury area choosing Meadowlands as their favorite place for ice cream. From personal experience, I have and know people who have driven over twenty minutes, passing many other ice cream stands, in order to get Meadowlands Homemade Ice Cream. Also, when family that has moved across the country comes back to visit, they make sure we make time to take a trip to Meadowlands. This is echoed through the reviews of Yelp.com, a popular website for honest reviews about a variety of businesses. Out of thirteen reviews, five people gave five stars (the maximum) and seven people gave four stars. Many of the reviews discuss the fair prices, the amount of ice cream given, the ample parking space, the friendly staff, and of course the delicious taste. The loyalty of Meadowlands customers can also be seen. Many reviews state they have been going to Meadowland’s since their childhood and one reviewer has been frequenting the stand for over twenty-five years. The people writing the reviews are from a variety of places. Locally, in Tewksbury, almost an hour away in Boston, MA, to Brookline, New Hampshire. All using phrases such as “love”, “best ice cream around”, and “favorite” (Yelp 2014).

Meadowlands has all the makings of a business ready to be a franchise. The concept is a familiar concept to people across all demographics, the business is already profitable, and there is positive, widespread demand for the product. It is a quaint, classic, ice cream stand known for their delicious, homemade ice cream. This is the niche Meadowlands holds in the industry and these features make the first step of turning a business into a franchise (Tice 2014). The next step is to evaluate the business in regards to Porter’s Five Forces. Economist and professor, Michael Porter, designed a framework that can help managers better understand the industry in which they are operating. These five forces shape the industry competition. Porter’s Five Forces include; the threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute product or service, and the rivalry of existing competitors (QuickMBA 2010).

The first four of Porter’s Five Forces circle around the fifth, rivalry. While there could be hundreds of places to get ice cream across New England, there are a variety of types of ice cream shops. There are stands, year round stores, and some that are restaurant that also offer cakes and other desserts. There are only a handful of stands in the Tewksbury and surrounding areas. The biggest competition Meadowlands would face is Hayward’s Ice Cream. First started in Nashua, NH, Hayward’s now has several locations in the Southern New Hampshire area. It is also a seasonal ice cream stand that offers similar types of products. Other ice cream shops in the area include business like Dairy Queen and ColdStone Creamery. These are larger chains and while they offer ice cream, the atmosphere and products are very different than that of a traditional, classic ice cream stand. Hayward’s Ice Cream is the only ice cream Meadowlands would be competing with. This competition can be combatted by strategically locating additional Meadowlands locations. For example, the people in the neighborhood surrounding Hayward’s in Nashua are loyal to that stand. Meadowlands, if placed in Nashua, would need to be located several exits away South toward the mall or North approaching Manchester.

In Porter’s Model, the threat of substitutes are substitute products from other industries. With recent health trends people at times may opt for a healthier option. Products such as frozen yogurt people see as a healthier than ice cream but still a refreshing treat on a hot day. It is a realistic substitute for ice cream. The prices of ice cream compared to frozen yogurt are not drastically different. If the price of frozen yogurt were to noticeably increase, the quantity of ice cream demanded would increase. Likewise, if the price of ice cream were to increase, the quantity demanded for the substitute of frozen yogurt would increase. As more substitutes arise, the demand becomes more elastic (QuickMBA 2010). Fortunately for Meadowlands and the ice cream industry, there are not many close substitutes. Additionally, people looking for a healthy alternative also opt for sugar-free ice cream. Meadowlands offers this option. Also, if placed by a school, park, or baseball field, an additional location of Meadowlands will attract a group of customers where healthier options are not a concern.

There are a variety of barriers to entry a business can face. The government, patents, asset specificity, and economies of scale can all create barriers to entry into an industry. Each industry is different and may face one or more of these barriers. The barrier to entry for an ice cream stand is not significant. Competition, especially in a high traffic area, is the biggest barrier an ice cream stand will have to face (Gaebler Ventures 2013). There are no patents to face or government regulations, other than the standard health standards needed for producing and selling food. As an already established business, Meadowlands has already entered the industry. The barrier they will have to face is the competition and foot traffic in the decision of choosing the new location. The location should be near a school, baseball, field, or popular park. One of these locations away from the competition will reduce the difficulty of the barriers to entry. This location will be in an area with heavy foot traffic, near the target market and away from competition.

The bargaining power of buyers also has an impact on a producing industry. There are three scenarios where buyers are considered to be powerful. These scenarios are; of there are few buyers with significant market share, if the buyers purchase a significant proportion of output, and can threaten to buy a producing firm or rival. Buyers are weak when; producers can take over distribution, the product is not standardized and buyers cannot easily switch to another product, buyers have no particular influence on product or price, and producers supply a critical portion of buyers’ input (QuickMBA 2010). Meadowlands’ buyers are not completely powerful nor weak. With ninety percent of American households consuming ice cream each year, there are many buyers and therefore do not have the significant market share few buyers do in order to dictate the market. They also do not have a credible backward integration threat. In addition, although it is unlikely, buyers can switch to a substitute. Overall, the buyers in the ice cream market are not a threat to the business as they do not have a significant bargaining power.

As buyers can be classified as powerful or weak, suppliers can be as well. Characteristics of powerful suppliers include; the significant cost to switch suppliers, having credible forward integration threat, being concentrated, and having powerful customers. Suppliers are weak if; there are many competitive suppliers, the business purchases commodity products, have credible backward integration threat, weak customers, and have concentrated purchasers (QuickMBA 2010). The suppliers Meadowlands would encounter would not be considered weak. The supplies and ingredients they would purchasing are standard, commodity items that one could simply buy at a grocery store. The products nor the cost to switch suppliers would be significant. The suppliers would not have a powerful hold or tie to the company. Meadowlands would have to find a supplier where they could get the simple ingredients they need in bulk at a value cost.

Action Plan

The following is a 12-month action plan for turning Meadowlands Homemade Ice Cream into a franchise.

Template provided by (ACP 2014).

Conclusion

Meadowlands has a strong, solid, repeatable, and familiar concept. Ice cream is a favorite treat of ninety percent of Americans (Ayles 2013). The main key to the success of the company is the recipe. A recipe is something that is easily taught and can be repeated. This will ensure the consistency between the multiple locations and speaks to the ability to be franchised. The business already has a loyal customer base and has created a niche in the market. The environment, staff, menu, and atmosphere all contribute to the uniqueness of the business and support the niche it has. Meadowlands is already profitable and will likely be profitable as a franchise. The annual revenue of the business is estimated to be five hundred thousand to one million. This revenue is earned only during March through October. Further, Meadowlands operates in a market that has only grown over the past several decades and contributes to the trends of the industry. Lastly, the company has a loyal and growing customer base. Each of these features offers an advantage and positive note to the ability to be franchised.

I would invest in this franchise. Not only am I a loyal supporter and customer of Meadowlands but the facts of the business support this decision. This ice cream stand is a long-standing and profitable business. The ice cream trend is not diminishing in the near future even given the recent healthy trends. Not only is Meadowlands in the right business but what they offer is exactly what is in demand. The most popular flavor year after year is vanilla. The top five top selling flavors continue to be simple and classic flavors. This is exactly what a customer can get at Meadowlands. Through Porter’s Five Forces, one can learn the niche Meadowlands has created in the market. There are certain features one would expect to see in a business looking to be established as a franchise. Meadowlands possesses these features. The research, facts, forces, and features of Meadowlands Homemade Ice Cream all prove this business to be a successful franchise.

Link to Website of the Business

Meadowlands Homemade Ice Cream’s website: