How does a drive-thru iced tea franchise sell more than 400 franchises in five years, and earn the No. 9 spot on our Top New & Emerging Franchises list? We spoke with HTeaO’s chief development officer Andrew Hawes to learn why franchisees see the brand as a sweet opportunity.
How did HTeaO get started?
Our founder, Gary Hutchins, has owned a hamburger restaurant in Amarillo, Texas, called Buns Over Texas, since the 80’s. He started selling iced tea there in the mid-2000’s. And around the time of the last recession in 2008, he started noticing people were coming in and instead of spending 10 bucks on a hamburger, they were just spending two or three bucks on an iced tea. So in 2009 he added on 1,200 square feet to his hamburger restaurant and launched Texas Tea, offering eight flavors of iced tea from a drive-thru.
His son Justin, who is now our CEO, joined him and his mom in 2012, and that’s when they launched the first prototype of a freestanding Texas Tea. And once we opened that, we realized we might have something special that we might be able to franchise. So we spent five or six years building the franchise model and the support system and the infrastructure, and then launched the franchise opportunity in 2018, at the same time that we rebranded Texas Tea to HTeaO.
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Do you think this is a concept that can go nationwide?
I think at some point it will, and we’ve even had some interest, crazily enough, from places like North Dakota and Idaho. But right now our focus is the southeastern United States, what I would call “tea drinking country.” The barrier to entry is much less because you don’t have to explain what iced tea is someone in Georgia. So our growth strategy, still being an emerging young brand, is to build our brand and our awareness in the southern U.S., and then once we have that exposure and have a thousand locations open, we can get into some of the more northern states that aren’t as familiar with iced tea yet. And one of the main reasons we brought on what we call our brewhouse offerings, which is our hot tea and coffee offerings, along with increasing our morning traffic, was to eventually go into those markets where hot drinks are more popular.
What are your goals for the brand for 2023 and beyond?
We have 68 locations open and operational today, and 93 under construction, so that should bring our total to about 160 stores open in the next 12 months. Beyond that, we’ve already awarded 430 franchises in total, and we’re looking at awarding 175 more this year. The plan is to have 500 locations open by the end of 2026.
To what do you attribute that growth?
It’s a model built around the most profitable part of a restaurant. Any restaurants owner will tell you beverages are where the money is made. We eliminated all of the frustration and equipment that goes with food preparation. And it doesn’t take a rocket scientist to realize that water, tea, and ice are not too terribly expensive, so the margins can be very lucrative. I think people can visualize, Hey, this is something I can do. I don’t need culinary experience or a background in restaurant management.
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What types of franchisees has HTeaO attracted?
In the beginning, it was a lot of second career type people — people who said, “I’d love to build a business for myself, but I need that support mechanism of a franchise.” So for the first few years, our growth was heavily weighted toward single-unit operators, and they’ve been fantastic. Now that we’ve built some brand awareness, we’re starting to attract multi-unit, multi-brand franchise partners, which is extremely humbling. I still view us as a very young, unknown brand, so to have someone with 20 or 30 years of experience in the franchise space take a leap of faith means a lot to our team. We’re still going to welcome single-unit franchisees, but bringing on multi-unit partners who can do five to 20 stores over a shorter period because they have the infrastructure already in place is really going to be key to our growth going forward.