BUDDING VENTURE

KaBloom is set for growth. The florist expects to cultivate $50 million this year.

The implementation of the concept of flowers as an everyday purchase is shaking up the American floral industry, and the folks at KaBloom, Ltd. couldn’t be happier.
The idea of having cut flowers as part of your everyday décor is a habit for Europeans, who pick up fresh blossoms on a daily basis much as they pick up fresh bread, meat, or dairy products. So, when KaBloom first opened its doors in 1998, most Americans found the concept a little European.

Even so, it didn’t take long for KaBloom’s combination of quality flowers, attractive prices, and easily accessible locations to become popular with Boston-area consumers. Their flower buying habits changed from “special occasion only” to “everyday pleasure” purchases.

Driven by growth and consumer demand, the company expanded from strictly cash-and-carry retail to a full-service florist (still with a strong component of cash-and-carry) and began franchising. As KaBloom stores open up across the country, the company is working hard to educate American consumers in all markets that fresh flowers don’t have to be limited to special occasions.

“In Europe, buying flowers is an everyday thing,” says Steven Siegel, KaBloom’s chief operating officer and chief financial officer. “In the United States, this has historically been an occasion-driven business, supplemented on a day-to-day basis only at the low end. It’s ironic that the United States is the world’s largest consumer of virtually everything else at retail, but not fresh cut flowers. So we saw that as an opportunity for the cash-and-carry concept.”

KaBloom store operators are not just part of a big chain; they’re active members of the community. Siegel says, “Our franchisees are very involved in their communities, very dedicated to the communities. We’re a part of the family. We understand that we’re dealing with emotions, whether it’s that daily pick-me-up bouquet or flowers for a wedding or funeral. So we’re involved in the local Chamber of Commerce, various service organizations, churches, and other community groups.”

Unlike many florists that depend on accessory sales (cards, balloons, stuffed animals, gift items, etc.) for a substantial portion of their revenue, KaBloom’s focus is on fresh flowers. The stores feature a large walk-in cooler stocked with anywhere from 50 to 100 or more types of fresh cut flowers and plants. With such a wide selection, customers are assured of finding exactly what they want.

By contrast, the typical florist that does 80 percent of his business over the phone carries a minimal inventory and instead only orders flowers from a local wholesaler when he gets a specific order. These operations generally have a reach-in cooler with a limited selection of perhaps 20 different flowers and plants.

Siegel says that once a customer comes in for that first everyday flower purchase, she’ll be back for more—or he will, and then KaBloom will also be the choice for all the floral events in the customer’s life. “There is really no reason why we should ever lose a customer once we’ve got her or him!” Siegel says.

Q & A With Steven Siegel
Steven Siegel, is Chief Operating Officer, Chief Financial Officer, and Director with KaBloom, Ltd. He is also a Principal Partner and Director of the Watermark Donut Company, a Dunkin’ Donuts franchisee which operates approximately 35 Dunkin’ Donuts franchise outlets in the northeast. Siegel has also served as Chief Financial Officer of Filene’s Basement, Inc. His many professional achievements include being the first franchisee to serve as Chairman of the International Franchise Association (IFA).

Q. Where are your franchisees coming from and what is attracting them to KaBloom?
This is a real feel-good business—it’s a business that makes you smile. Our stores are unlike any other flower store because they’re just delightful places. Our franchisees are a blend, and they don’t fit a particular profile. We have downsized executives, high-tech people, marketing people, HR people—people from a wide range of industries and backgrounds who see the potential in KaBloom and want to be a part of it.

Q. What sets KaBloom apart from other retail franchises?
In addition to the feel-good aspect, this is sane retail. My donut business is crazy—it’s 7 days a week, 24 hours a day, 365 days a year. But KaBloom is a business where you are only open between 65 and 80 hours a week. You may or may not be open on Sundays. People don’t typically buy flowers at 6:00 in the morning or 10:00 at night. So our stores open between 8:00 and 10:00 in the morning, and they’re closed by 7:00 in the evening, except maybe on Fridays, when they might stay open a little later. It’s easy to get help, because people love working in flower stores. And the business has great margins.

Q. Who are your customers?
Our core demographic is a 22- to 55-year-old female who makes $25,000 to $125,000 a year. That’s the customer who buys from us every day. Of course, on Valentine’s Day and Mother’s Day, our customers are virtually anyone and everyone.

Q. Why is this core customer buying from you?
To feel good. It’s as simple as that.

Q. How do you deliver the orders you receive through your website?
Right now, those orders are delivered by FedEx. Our goal is for our franchisees to fulfill the Internet orders, and that will begin this fall (2003). The flowers will be arranged in a vase, rather than shipped dry with the vase in a separate compartment. Also, we won’t have to deal with shipping restrictions because of the carrier’s schedule or potential delays or problems because of heat or cold. We will be the first chain to deliver Internet sales ourselves rather than using other carriers, and that’s going to put us miles ahead of everyone else in the industry.

Q. What sort of products do you carry in addition to flowers?
We have a limited amount of items such as greeting cards, balloons, pottery, and similar products. It’s limited because it’s not a major part of our business. We’re all about flowers—a wide variety of fresh cut flowers in an on-hand inventory that our customers can see, touch, smell, and then choose. This is something traditional florists just don’t offer.

Q. Flowers are perishable. With such a large inventory, aren’t you taking a risk that the flowers will wilt before they sell?
That’s part of the business, and it’s built into the margin. We teach franchisees how to control that.

Q. How do you see KaBloom fitting into communities across America?
Our franchisees are very involved in their communities, very dedicated to the communities. We’re a part of the family. We understand that we’re dealing with emotions, whether it’s that daily pick-me-up bouquet or flowers for a wedding or funeral. So we’re involved in the local Chamber of Commerce, various service organizations, churches, and other community groups.

Q. What are the elements about this industry that are going to help you?
This is a very stable industry. It’s been around forever, and it will be around forever. Certainly parts of it—such as fresh flowers as an everyday purchase—are subject to the economy. But the rest of the flower business is not. When you get married, you have flowers. When you die, you have flowers. When there is an anniversary, or Mother’s Day, or Valentine’s Day, you have flowers. So that makes the industry very stable.

Q. What is behind your success?
We are very focused. We have methodically gone about our business and invested millions of dollars to learn who we are and what works and doesn’t work. We’re not afraid to try new things. That’s why halfway through next year, we will be the largest floral chain in the country. • •

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