THE DAIRY NEWS

$50 million a year for 78-year-old icon that now franchises ice cream shops.

OBERWEIS AT-A-GLANCE Oberweis Franchise Systems, LLC 951 Ice Cream Drive North Aurora, IL 60542 630-801-5300 www.oberweis.com/franchising Historical Data: In 1915, an enterprising dairy farmer named Peter J. Oberweis began selling his extra milk to friends and neighbors. Oberweis Dairy was founded in 1927 in Aurora, Ill., and today produces milk that is the freshest on the market and often delivered to home customers and stores within 36 hours of the milking process. Oberweis milk comes from a select group of 40 small dairy farmers in Wisconsin and Illinois who are paid a premium to produce high-quality milk exclusively for Oberweis Dairy without the use of rBGH (artificial bovine growth hormone). Oberweis has grown from 3,500 home delivery customers and one retail store in the late 1980s to nearly 45,000 home delivery customers in Chicago, northwest Indiana, central Illinois, St. Louis, Milwaukee and Indianapolis and 33 company-owned dairy stores in Illinois, northwest Indiana and St. Louis. Overall 2003 revenue was approximately $50 million. Franchise Fees: The franchise fee is $30,000 for the first store. Qualified individuals have the ability to enter into an area development agreement to establish multiple stores on a discounted basis. Assistance is provided to franchisees that purchase an Oberweis franchise in working with any third-party lender and/or financing process. It’s a nice option. Training/Support: Training is extensive and comprehensive, beginning with a four-week/240-hour initial program at Oberweis Dairy corporate headquarters in North Aurora, Ill., outside Chicago. Franchisees undergo the same training given company-owned store managers, a combination of classroom, hands-on and in-store training. An Oberweis representative is on site to provide additional training and assistance prior to and after the grand opening.

There wasn’t even a trail of spilled milk giving clue to the impending news. But when Oberweis Franchise Systems made its first public announcement on Aug. 5 that it was going to begin franchising its Oberweis Ice Cream and Dairy Stores, it received nearly 100 inquiries from potential franchisees.

Chicago’s venerable Wrigley Field was only 13 years old when Oberweis Dairy was founded in 1927 in Aurora, Ill. In the 77 years since, its home delivery of milk in glass bottles has become as much a Windy City institution as deep-dish pizza.

In 1951, the first Oberweis Dairy store opened—adjacent to its dairy processing facility—selling not only milk but also super-premium ice cream made to the same exacting standards as Oberweis milk, which today is often delivered to home customers and stores within 36 hours of the milking process.

Oberweis Dairy—family owned and operated by the third and fourth generations of the Oberweis family—hasn’t built a reputation, but rather earned one. Today, 33 company-operated Oberweis Ice Cream and Dairy stores in Illinois, northwest Indiana and St. Louis account for approximately 40 percent of overall revenue.

With the launching of the Oberweis franchise opportunity, the sound of clinking glass milk bottles and the taste of a couple dozen super-premium ice cream flavors will be in reach of more people than ever before. Initially targeting seven states—Illinois, Wisconsin, Minnesota, Indiana, Ohio, Michigan and Missouri—Oberweis expects to sell more than 500, and to open more than 300, ice cream and dairy stores during the next five years through a combination of single-unit franchisees and multi-unit area developers.

“This is not a concept,” said Mark A. Vance, vice president of marketing for Oberweis Franchise Systems. “This is a proven business model. We have 77 years of home delivery experience, and more than 50 years in the dairy store business. Our first dairy store opened when Harry Truman was president.”

According to Vance, Oberweis has considered franchising its dairy stores for almost a decade. But the company forged ahead only after putting together its own top-caliber franchising management team while also calling on respected outside experts such as the iFranchise Group, an industry-leading franchise consulting firm and Piper Rudnick, a law firm recognized as the world leader in franchise law.
“We run a profitable business. We’re not franchising because we have to, we’re franchising because we want to,” said Robert Stidham, Oberweis Franchise System’s vice president of franchise development.

To those who haven’t had the opportunity to savor the experience, Oberweis Ice Cream and Dairy Stores aren’t simply a place to run in for a quick gallon of milk and a vanilla cone to eat on the drive home.

There’s an old-fashioned soda fountain with glassware and real metal spoons to enjoy the best shakes and sundaes. The seating is plentiful and the ambiance family-perfect. And, of course, you can always purchase bottled Oberweis milk, pre-packaged ice cream and other food products.

It might explain why a Kansas City family drives nearly four hours to the nearest Oberweis Dairy store in St. Louis just for some ice cream.

“It’s an oasis for people to come with their family. You can have fun and create some memories,” said Vance of the dairy stores, which generate approximately 65 percent of their revenue from fountain sales. “We treasure that opportunity.”

By franchising its dairy stores, Oberweis has the opportunity to take its already-stellar commitment to customer satisfaction a notch higher because of the dedication of owner-operators. “Because of the financial and emotional investment the franchisee makes, their commitment to the success of the business is extraordinarily high,” Stidham said.

Oberweis will focus on opening stores in the major population areas of the seven states it has targeted. Several area developers, each with three to five stores, might blanket a major market. Expansion to secondary markets, likely with single-store franchisees, will happen as a by-product of the momentum created in the larger markets.

Home milk delivery—now offered in Chicago, northwest Indiana, central Illinois, St. Louis, Milwaukee and Indianapolis—will also likely extend to other major metropolitan markets that Oberweis enters.

While opening 500 stores in five years might seem ambitious for Oberweis, consider that a competitor in the super-premium ice cream category is expected to open 450 stores in 2004 alone. “Oberweis is not a pedestrian brand. You’re not going to put one on every street corner,” said Stidham. “Doing it right, rather than doing it fast is at the heart of Oberweis Dairy.”

Oberweis is targeting suburban locations for the dairy stores, which range in size from 2,500-2,800 square feet and seat 40 customers. Freestanding and end-cap locations will offer the option of drive-thrus.

Stidham said the diversity of offerings found in the Oberweis Dairy stores is what makes them attractive to both customers and potential franchisees:
The “fountain” experience makes the dairy stores a “destination” spot for customers, especially families.

Ice cream is an affordable luxury that everyone loves to have as part of their everyday celebrations.

Sales of milk, pre-packaged ice cream and other food products help maintain year-round sales.

Oberweis Dairy plans to support its franchised stores by relying on and growing its network of 40 small midwestern dairy farmers who are paid a premium to produce milk exclusively for Oberweis without the use of artificial growth hormones. The company’s fleet of 70 trucks already covers more than 2 million miles annually.

Oberweis makes all its own products at its 75,000 square-foot dairy plant in North Aurora, Ill., with the same integrity in place since 1915, when dairy farmer Peter J. Oberweis began selling his extra milk to friends and neighbors.

“We’ve operated in good and bad economies, through war and peace. We lived through short hair, long hair and short hair again,” said Stidham. “There’s nothing new about what we’re doing other than trying to identify and attract outstanding business partners in the community to help us grow regionally, nationally and subsequently, even internationally.”

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