Bucking Starbuck’s:
Kelly’s Coffee & Fudge Factory
Before Shlomi Michaels took over the 14-year-old Kelly’s Coffee & Fudge Factory in 1997, he read the tea leaves on the gourmet coffee market.
"I recognized that
the Starbuck’s of the country have moved the yuppies of America to the gourmet coffee
market," Michaels told E.S.P. "I also recognized that the yuppies of 10
years ago are family people today. Evaluating the market, I came to a conclusion that we
must create a family-oriented gourmet coffee outlet that will service the complete family,
run by a family, that will have ‘no down time’ in sales during the day. Since
coffee is dominantly a morning drink, I needed to create a menu that will stimulate the
customer no matter what time of the day it is. I also needed to cover the hot months of
the year when traditionally coffee consumption is lower." 
Recognizing his own limitations, Michaels said, he fortified his operation with two professionals in the industry: Paul Wilmoth, who has close to 40 years in the industry, and Duane Peck, who has more than 20 years in the coffee and food industry.
Kelly’s Coffee & Fudge is currently dominating the Southern California market and was voted by the Today show in Los Angeles as the best gourmet coffee outlet in the city. They were also recognized by a leading newspaper as serving the best frozen drink in the Phoenix and Tucson areas.
Franchisees Go For More
The company is franchise-driven and close to 50% of the franchisees are presently opening second locations. Kelly’s Coffee & Fudge Company blends the rapidly expanding market of specialty coffee retailing with an extensive menu of freshly baked pastries and home style fudge which appeals to the whole family. Specialty coffees and specialty frozen drinks such as Iced Coffee Royale make the concept a year round draw. Homemade fudge with flavors like Chocolate Caramel, freshly made Caramel Apples and homemade Rice Krispies Treats un-dipped or dipped attracts the kids, and those with a sweet tooth.
Three concepts are available: Kelly’s Cart, which locates in center food courts and transportation centers; Kelly’s Mini-Store franchise, carrying the full menu without the baking and fudge making on premises; and the full-service Kelly’s Coffee &
Fudge Factory concept, offering baking, fudge, and drink making on premises, and an extensive sandwich and salad menu. Other merchandise carried includes coffee brewing accessories, cups and gift items.
The company will refer financing avenues for franchisees to approved banks for small business loans. The franchise development process for Kelly’s Coffee & Fudge includes assistance with real estate, as well as design and build up of store and complete training support. Kelly’s real estate department assists throughout the entire site selection process. Kelly’s signs the master lease and the franchisee signs a sublease agreement. Total start up fees range from $125,000 to $198,500 including the franchise fee, equipment, initial supplies, deposits, insurance, leasehold improvements, architectural engineering, and initial working capital.
Percolating for Growth Spurt
The company operates 28 locations in Arizona, California, and Missouri. Optimum sizes range from 500 to 1,500 square feet. Potential sites include freestanding facilities, end caps, and pads. Also, in-line space within exceptionally well located entertainment centers, downtowns, power centers, community centers, neighborhood shopping centers and malls will be considered. Desired areas of immediate expansion include the area of Bakersfield to San Diego in California, however, the company plans to expand nationally.
Herbert Andrews of Grubb & Ellis relays that Kelly’s Coffee & Fudge requires a vanilla shell, 400 amps of power, air-conditioning units of one ton per 250 square feet, 400,000 BTU’s gas, 1 1/4" water line, 4" sewer line, ADA restrooms, and $15 per square foot in tenant allowance. Typical leases are either five years with three options of five years each or 10 years with two options of five years each.
For more information contact the exclusive brokers, Grubb & Ellis, Team Leader, Herbert Andrews, 4695 MacArthur Court, Suite 600, Newport Beach, California, 92660 or by phone at 949-833-2900, Fax 949-833-8037.
For more information on the company or franchising contact Shlomi Michaels, Kelly’s Coffee & Fudge Factory, 9100 Wilshire Boulevard, Suite 517 East, Beverly Hills, California, 90212; or by phone at 310-786-8600, Fax 310-786-8606 or visit their Web Site at www.kellyscoffee.com.