Carvel

## Executive Summary

Carvel represents America's first retail ice cream franchise, operating continuously since 1934. Now part of Focus Brands (Roark Capital), the system has 326 locations across 16 states and 8 countries. Investment ranges from $379,000-$786,000 with modest average revenues around $481,000 and estimated earnings of $58,000-$72,000. The brand's ice cream cake business (25% of revenue) provides differentiation and year-round income stability. Seasonal ice cream sales and aging brand awareness present challenges.

## The Business

Carvel operates ice cream shops specializing in soft-serve ice cream and signature ice cream cakes. Founded in 1934 by Tom Carvel when his ice cream truck got a flat tire - he sold the softened ice cream to enthusiastic customers, discovering the appeal of soft-serve.

The brand differentiates through: - Fresh, made-daily ice cream (every shop produces its own) - Signature ice cream cakes (Fudgie the Whale, Cookie Puss) representing 25% of revenue - 90+ year heritage and brand recognition - Non-traditional venues (stadiums, airports, amusement parks)

Carvel products also reach consumers through 9,500+ supermarkets, extending brand visibility beyond retail locations.

## The Numbers

**Investment Requirements:** - Total Investment: $392,375 - $785,850 - Franchise Fee: $30,500 - Royalty: 6% of gross sales - Marketing Fee: 4% of gross sales

**Financial Requirements:** - Liquid Capital: $100,000 minimum - Net Worth: $250,000 minimum

**Financial Performance:** - Average Gross Sales: $480,774 - Estimated Earnings: $57,693 - $72,117

The modest revenue and earnings figures reflect the seasonal nature of ice cream sales and smaller footprint locations. The ice cream cake business helps offset seasonality by driving sales for birthdays and holidays year-round.

## System Health

Carvel operates 326 locations across 16 states and 8 countries. The system has contracted significantly from peak years - the brand once had over 800 locations.

As part of Focus Brands (owned by Roark Capital since 2001), Carvel benefits from shared infrastructure with sister brands including Auntie Anne's, Cinnabon, Jamba, and Schlotzsky's. Focus Brands provides real estate, marketing, and operational support.

**International Expansion:** Carvel recently partnered with National Franchise Company to expand into Saudi Arabia, Bahrain, Qatar, and Egypt, targeting Middle East markets with growing Western food appetite and young demographics.

## Franchisee Experience

**Training:** - Two weeks at Carvel's corporate training center - Covers operational procedures and product knowledge - Ongoing support and operational resources

**Operational Model:** The made-fresh-daily model requires franchisees to produce ice cream on-site, ensuring quality but demanding operational attention. This differs from concepts using pre-made products.

**Flexible Formats:** - Traditional standalone shops - Non-traditional venues (stadiums, airports, theme parks) - Co-branding with other Focus Brands concepts

## Risk Assessment

**Seasonality:** Ice cream sales peak in summer months. While cakes provide year-round revenue, franchisees must manage cash flow through slower winter periods.

**Brand Age:** While heritage provides authenticity, the brand may lack appeal to younger consumers compared to trendy concepts like rolled ice cream or nitrogen ice cream.

**Disclosed Litigation:** The FDD discloses lawsuits and/or bankruptcy information. Prospective franchisees should review this disclosure carefully.

**System Contraction:** The network has shrunk significantly from 800+ locations historically. Understanding reasons for closures is important due diligence.

**Modest Unit Economics:** Average sales of $481,000 and estimated earnings of $58,000-$72,000 represent modest returns for the investment level.

**Competition:** Dairy Queen, Cold Stone Creamery, and local ice cream shops compete for the same customers.

## Competitive Position

| Competitor | Positioning | |------------|-------------| | Dairy Queen | Larger system, food menu beyond ice cream | | Cold Stone Creamery | Mix-in customization, similar investment | | Baskin-Robbins | 31 flavors positioning, larger footprint | | Local Ice Cream | Artisan appeal, hyperlocal focus |

Carvel advantages: - First-mover heritage (90+ years) - Ice cream cake category leadership - Made-fresh positioning - Focus Brands infrastructure

Disadvantages: - Smaller system than major competitors - Aging brand perception - Regional concentration (primarily Northeast)

## Validation Questions

1. What is the typical revenue trajectory for new locations in years 1-3? 2. What percentage of revenue comes from ice cream cakes versus soft-serve? 3. How do non-traditional venue locations perform compared to standalone shops? 4. What is the franchisee turnover rate and reasons for exits? 5. What support exists for managing seasonal cash flow challenges? 6. What marketing initiatives target younger consumers? 7. What is the status of the disclosed litigation?

## Data Gaps

- Detailed Item 19 breakdown by location type and age requires FDD review - Franchisee satisfaction metrics from independent sources not available - Litigation details and current status not publicly available - Regional performance variation not disclosed - Reasons for historical system contraction not detailed