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MALLS’ FAVORITE AUNT HOOKS SHOPPERS WITH PRETZELS

By Lee Kessler

Auntie Anne’s prefers ‘impulse buy’ areas away from the food court.

Visitors to ICSC’s annual Spring Convention know that it ain’t over until the last Auntie Anne’s pretzel has been served up in the Leasing Mall. However busy the convention’s deal makers may be, they somehow always find time to stand in line for the chain’s hot buttered pretzels.

The popularity of the snack has come as something of a surprise to Auntie Anne’s founder, Jonas Beiler. In 1987 he didn’t know anything about pretzels. He wanted to start a family counseling service in his native Lancaster County, Pa. If you had told him then that pretzel sales exceeding $217 million annually would contribute significantly toward the realization of his family service, he might have suggested you were in need of some counseling yourself. But that’s what happened.

Jonas’ wife, Anne, was raised in an Amish-Mennonite family and viewed the world from the back of a horse-drawn buggy for the first years of her life. To support her husband’s endeavor, she bought a booth in the Downingtown, Pa., farmers’ market, where she sold pizza, ice cream and hand-rolled soft pretzels.

One day a supplier mistakenly delivered the wrong pretzel ingredients, leading Anne and Jonas to experiment with recipes until they found it — a somehow perfect blend of butter, salt and freshly baked dough. That first bite, taken in the Beiler’s kitchen, launched what Entrepreneur magazine called the “pretzel retailing revolution.” Today Auntie Anne’s hand-rolls more than 2 million soft pretzels a week, and about six other companies offer similar products.

The first Auntie Anne’s franchise opened in March 1989 in Harrisburg, Pa., followed eight months later by the company’s first mall store in Lancaster, Pa. By December 1990, 50 stores were operating in nine states. Today there are more than 700 stores worldwide, most of them in malls, in Indonesia, Japan, Malaysia, the Philippines, Saudi Arabia, Singapore, South Korea, Thailand, Venezuela and the United Arab Emirates. In May the company opened a unit in Ontario, Canada, and another in London, England.

Of those, 75 stores internationally are licensed, while in the United States eight are licensed, 30 are company-owned and 608 are franchised.

“The malls love us,” said Ken Brunini, a franchisee who operates 11 Auntie Anne’s stores in New England. “We’re very stable tenants, we know our business, and we run a very clean operation.”

Part of knowing their business comes from the comprehensive training program that Auntie Anne’s provides to franchisees. This is corroborated by Michael Cox, president and CEO of Media, Pa.-based Long Pond Food Services, which has entered into a joint venture with Auntie Anne’s to open stores in Canada.

“When I was dealing with developers in Canada, I could answer all their questions right there at the table,” Cox said. “The training really paid off.”

In May Long Pond debuted Auntie Anne’s at the Scarborough (Ontario) Town Centre, the first of four stores set to open in the province this year. Its goal is to have 20 stores in Ontario by 2005.

A typical in-line store averages about 500 square feet, and kiosk units are also available to franchisees. Auntie Anne’s stores bake fresh pretzels every half-hour until closing time, guaranteeing that no product will be more than 30 minutes old. Those stores may also support “satellite” retail units — boothlike product outlets without an oven, usually located on another floor of the same venue.

Customers can watch the dough being mixed, cut and baked. This provides some entertainment as well as underscoring product freshness and store cleanliness. To maintain that cleanliness, Auntie Anne’s conducts rigorous inspections, both announced and unannounced, of every franchise.

Stores are typically located away from the food court, which positions the product as an impulse buy and maximizes the advantage of the fragrance of freshly baked pretzels. However, because the percentage of repeat customers can be very high (Brunini puts it as high as 60 percent at some stores) Auntie Anne’s is also a destination.

Of 10 available flavors, each franchisee is required to offer six, including the addictive “original” and the cinnamon sugar. Optional flavors, offered at the discretion of the owner/operator, include jalapeño and parmesan herb.

Potential franchisees are carefully screened at Auntie Anne’s home office in Gap, Pa.

“What we’re looking for is someone who has the drive to commit the energy that it takes to operate a store like this,” said Sam Beiler, president and CEO of Auntie Anne’s and a distant cousin of Jonas. “And we’re also looking for someone who is comfortable with following a system that has been refined over 15 years, a system that’s been proven to work again and again. That’s a challenge. Many times people bring one quality or the other, but both are important.”

As a joint venture partner, and because the venture is Canada-based, Long Pond’s Cox may have more flexibility with what he sells. He reports great success with coffees and such specialty drinks as cappuccino and latte; he also sells coffee by the pound.

Back in the United States, however, franchisee Brunini flatly states, “I am not in the coffee business.”

As it continues to build its pretzel business, Auntie Anne’s is also developing a concept called Cre-ámo — frozen custard entwined with fruit ice in a fresh-baked waffle cone that made an appearance at this year’s ICSC Spring Convention. Growth of these stores will be held to 10 in the coming year to allow the company to evaluate their standards and quality. And the company is not afraid to pull a product if it doesn’t come up to snuff. Last year a concept called Cookie Farm was deemed insufficiently profitable and abandoned.

Sam Beiler says that even though people are spending less time in malls than before, Auntie Anne’s will remain a predominantly mall-based retailer. “Yes, there are fewer customers walking through the malls, but there are still a lot of them.”

Looking back, Sam Beiler says he is as proud of the company’s brand management and corporate culture as he is of its tasty product; if the latter was no accident, the former did come as something of a surprise.

“In the early days,” he noted, “when there were only 25 or 50 stores, you could barely even call that a brand. And yet, without realizing it, we were carefully protecting the brand by how we walked and talked and interacted with people. We didn’t recognize that as an important part of brand management. But looking back on it, we’ve done a pretty strong job of managing and protecting the brand.”

Today more than 25 percent of the company’s net profits are given to charitable organizations, including Jonas Beiler’s Family Resource and Counseling Center, the Children’s Miracle Network and others.

As for growth at Auntie Anne’s, Sam Beiler delineates the goals in a way that few company presidents would. He says he is not so preoccupied with the number of new stores that will open in any given year. “We don’t focus as much on that as we do on the quality of the units that we open,” he said. “We had 41 new units projected for this year, and it turned out to be 50. I would be as satisfied with 30, if they were the right locations with the right operators. Because our focus will continue to be on quality over quantity.”

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