Risk Score
Pending analysis
Investment Range
$21,600 - $782,932
Franchise Fee
$10,000
Min Cash Required
$15,000
Total US Locations
547
Business Summary
Rita's operates ice cream and frozen dessert shops, featuring a menu of Italian ice, frozen custard, frozen desserts, drinks, toppings, and proprietary gift products. The shops maintain a distinctive exterior and interior design, decor, and color schemes, adhering to specific standards for products, equipment, and operations. Rita's franchisees offer these menu items from standard, express, satellite, or mobile units. Franchisees also have the option to engage in catering activities and operate mobile units for special events, supported by the main shop's production capabilities.
Corporate History
Rita's Franchise Company, LLC was formed in October 2016 as a Delaware limited liability company, initially named RWIFC Acquisition, LLC. In January 2017, the company adopted its current name and began offering franchises. Its current operations are built upon the acquisition of substantially all assets of the Rita's franchise system from Rita's Holdings, LLC and its subsidiaries (Predecessor Entities) in December 2016. The Rita's brand itself has a longer history, with predecessors having offered franchises since May 1989. The earliest form of the Rita's Water Ice business was operated by an affiliate of the Immediate Predecessor, Rita's Properties, Inc., starting in 1984.
Financial Overview
Investment Range
$21,600 - $782,932
Franchise Fee (Low)
$10,000
Franchise Fee (High)
$35,000
Minimum Cash Required
$15,000
Royalty %
6.5%
Marketing %
3%
Equipment Costs (Low)
$10,000
Equipment Costs (High)
$614,044
Working Capital
$25,000
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
RWIFC Holdings, LLC, the parent company of Rita's Franchise Company, LLC, demonstrates a healthy financial position based on its audited financial statements. The company reported a net income of $7,972,950 in 2023, an increase from $4,739,448 in 2022. Its current assets significantly exceed its current liabilities, with $16,826,227 in current assets and $7,381,798 in current liabilities as of September 30, 2023. Members' equity also shows growth, standing at $28,167,688 in 2023. The independent auditor provided an unqualified opinion, indicating that the financial statements present fairly the company's financial position and results of operations without material misstatements. There are no concerns raised about the company's ability to continue as a going concern.
Financing Details
Rita's Franchise Company, LLC does not offer direct or indirect financing to its franchisees, nor does it guarantee any notes, leases, or other obligations. Franchisees are responsible for securing their own financing. However, Rita's participates in the Small Business Administration (SBA)'s Franchise Registry Program, which may allow for modifications to franchise and development agreements to meet SBA loan program requirements.
Performance Metrics
Total US Locations
547
Franchised Units
546
Corporate Units
1
Avg Square Footage
800
Franchising Since
1989
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
7
Litigation Summary
Rita's has been involved in several legal disputes. In 2015, the Immediate Predecessor faced a class action lawsuit regarding alleged violations of the Telephone Consumer Protection Act, which was settled for $3,000,000 in 2016. Concurrently, the Immediate Predecessor settled an arbitration with a former franchisee for $400,000. More recently, in July 2019, a group of five franchisees (Scarpulla Plaintiffs) filed a lawsuit against Rita's and its Immediate Predecessor, alleging violations of the California Franchise Investment Law and misrepresentations. This action, along with related arbitration demands filed by the Immediate Predecessor in 2021, was settled in June 2024 for $450,000, with the Immediate Predecessor contributing $100,000 to the settlement. Additionally, during its 2023 fiscal year, Rita's initiated three separate arbitrations against franchisees concerning damages, collections, or abandonment of the franchise relationship.
Bankruptcy History
Rita's has no bankruptcy history to report. No bankruptcy proceedings were required to be disclosed in Item 4 of the Franchise Disclosure Document for Rita's Franchise Company, LLC.
Agreement Terms
Initial Term
10 years
Renewal Term
10 years
Renewal Conditions
To renew the franchise agreement for a Standard or Express Rita's Shop, franchisees must provide written notice to Rita's between 9 and 12 months before their current term ends. They must renovate their shop to meet current brand standards, ensure they have no outstanding monetary or other obligations to Rita's or its affiliates, and be in full compliance with all existing agreements. Additionally, franchisees must have the right to maintain possession of their approved location for the renewal term, sign a new franchise agreement (which may have different terms regarding fees and territorial rights), sign a general release of claims against Rita's, meet current qualification standards, complete any required training, and pay a renewal fee equal to 50% of the then-current initial franchise fee for their shop type. Similar conditions apply for the renewal of Satellite and Mobile Unit addenda, including renovation, compliance, no outstanding debts, signing a new addendum, general release, training, and a renewal fee for a Satellite, and a $500 fee every 10 years for a Mobile Unit.
Training & Support Program
Franchisor Assistance
Before opening, Rita's assists with reviewing and accepting proposed shop locations, defining the territory, and providing standardized design plans and specifications. It offers initial training at no charge for up to two trainees and provides pre-opening and opening supervision. Franchisees also receive electronic access to the operating manuals. For development agreements, Rita's provides limited site selection and on-site evaluation assistance. During operation, Rita's makes marketing materials from the Branding Fund available, conducts operational inspections, and offers advice on managing the shop, including inventory control, equipment, and marketing techniques. Rita's also manages royalty calculations, provides training for new or replacement managers, updates operating standards, approves suppliers, and maintains the Computer System for data collection. Furthermore, Rita's administers the Branding Fund and may establish advertising cooperatives.
Initial Training Hours
76
Training Location
Trevose, PA
Ongoing Support
After opening, Rita's Franchise Company conducts periodic inspections of the shop's operations and provides advice and written materials on managing the business, including inventory control, equipment, food preparation, layout, and marketing techniques. Rita's also offers training for new or replacement managers and may require attendance at additional courses, seminars, and programs. The company maintains and administers the Branding Fund, directing all marketing programs and making marketing materials available to franchisees. Rita's may also designate geographical areas for advertising cooperatives, which franchisees are required to join and contribute to. The franchisor also specifies information to be collected and maintained on the Computer System and designates approved suppliers for products and services.
Franchise Requirements
Ideal Candidate Profile
Rita's Franchise Company seeks a hands-on Designated Owner who will devote full-time efforts to managing the shop, live within a one-hour drive of the location, and hold significant decision-making authority. Ideal candidates should demonstrate competence in computer applications, possess strong verbal and written language skills, have mathematical aptitude, and be able to prepare a business plan. They must also have good moral character, a positive business reputation, and a solid credit rating, along with adequate financial resources and capital to operate the shop. While prior related business experience is helpful, it is not explicitly required; rather, it serves as evidence of aptitude and ability to operate a Rita's shop. For existing franchisees looking to acquire additional units, they must meet the current standards for new franchisees, have the ability to operate multiple Rita's Shops, and have a satisfactory record of customer service and compliance.
Industry Experience Required
No
Management Experience Required
Yes
Sales Experience Required
No
Technical Skills Required
Yes
Operational Details
Location Type
Hybrid
Owner Participation
Hands-On
Territory Type
Non-Exclusive
Territory Size Requirements
Rita's Franchise Company defines territories on a case-by-case basis, considering factors like demographics, existing competition, growth projections, and the economic environment. For a Standard Rita's Shop in a large metropolitan area, the territory may be described by a shopping area, blocks, or a radius ranging from approximately one-tenth of a mile up to a maximum of one mile. In smaller cities or rural areas, the radius may extend from one-tenth of a mile up to two and a half miles. For Express Shops, the territory is generally limited to the venue or Institutional Facility where the shop is located. Territories are negotiated and documented in an Accepted Location Addendum, but Rita's Franchise Company explicitly states that franchisees do not receive an exclusive territory and may face competition from other franchisees, company-owned outlets, or other distribution channels.
Staffing Notes
Rita's Franchise Company requires franchisees to hire all employees for their Rita's shop and retain sole responsibility for all employment decisions, including hiring, firing, wages, training, supervision, and discipline. The System Operating Standards may provide guidance on staffing levels, identify management personnel, and specify employee qualifications, dress, and appearance. Franchisees are expected to maintain a competent, conscientious, and trained staff, including a fully-trained manager who may be the franchisee. Employees must uphold good customer relations and meet minimum service standards. For transferees, management and employee qualifications are assessed to ensure competence in computer applications, language skills, mathematical applications, and business plan preparation. While Rita's may offer guidance, it does not control day-to-day employment terms.