60-Second Business Plan
The pitch: When the occasion calls for something lighter than chocolates but tastier than tulips, Tariq Farid has just the gift: a bouquet, not of flowers but of fruit.
It's fruit artfully arranged: sculpted pineapple and cantaloupe shaped into daisy look-alikes, skewered grapes that resemble willow branches, and a whole array of other succulent produce fitted into a floralesque design.
This is not a business plan gone bananas, contends Farid, founder and CEO of Edible Arrangements, based in East Haven, Conn. Americans love fresh fruit. And as Farid points out, their love, fueled by a health-crazy zeitgeist, is growing. In 1999, Americans consumed, on average, 102 pounds of fruit per person, the third highest level in two decades. Add that to a $55-billion gift-giving industry and Farid thinks he's got the makings of a bountiful national franchise. "We want to become the Domino's of edible fruit bouquets," he says.
Farid is no rookie in the bouquet racket. As a precocious 17-year-old, he borrowed $6,000 from his parents and bought his own flower business in East Haven after working part-time in another shop. Four years later he had two shops and was pulling in 15 times what the former business had grossed.
He launched Edible Arrangements after spotting a fruit bouquet in a photo that a friend had brought back from a Bahama cruise. The idea intrigued him, but he believed he could do it better. So in late 1997 he turned the flower shops over to his family and began test-marketing his own fruit designs out of his home. Two years later he opened his first Edible store in East Haven, and a second followed the next year in nearby Norwalk. By 2001 the stores were pulling in combined revenues of $1.2 million.
FRUIT LOOPY: Tariq Farid of Edible Arrangements brings a fresh approach to the bouquet biz.
Convinced he has a winning concept, Farid is now on a mission to bring fruit bouquets to the rest of the country. During the past year he has sold his first two franchises, in Boston and Atlanta, and is aiming to open four more company stores and some 30 franchises in the next five years.
All the outlets will peddle a range of nine bouquets, priced from $29 to $179 and targeted at various market segments. One item is the Sweet Heart Bouquet, an arrangement of chocolate-dipped strawberries aimed at attracting flower-shy men. Because the products are so perishable (the company prides itself on using no preservatives), stores can provide only local service. So Farid is avoiding any nationwide branding efforts until he has more reach, instead pushing his slogan, "It's a bouquet, it's a banquet," through direct mail and local media outlets.
Farid is seeking his first round of outside financing to bankroll the expansion. In the meantime he's relying on word of mouth and his Web site to sell franchises, which cost $60,000 to $120,000 depending on their location. Franchisees pay a $25,000 fee and a 4% royalty, which Farid plans to kick up to 6% once things get rolling.
Edible Arrangements will have to beat back some rivals, including a handful of mom-and-pop vendors and a company in Pennsylvania called Incredibly Edible Delites. And there's always the chance that a deep-pocketed national florist like FTD will decide that pretty produce is profitable and jump into the mix. But Farid isn't fazed. "We have a great name, a strategic head start, and a product that sells itself," he says.
The Quick Once-Over
The Numbers: $450,000 in revenues, $15,000 net loss in 2000; $1.2 million in revenues, $12,000 net profit in 2001; $2 million in revenues, $65,000 net profit in 2002; $4 million in revenues, $200,000 net profit in 2003; $7 million in revenues, $900,000 net profit in 2004
Capital Raised: $40,000 from personal savings; currently seeking first-round financing
Biggest First-Year Expense: $30,000 for store setup and vehicles
CEO's Salary: $100,000
The Weigh-in: Our Panel Rates the Plan
Ripe or Rancid?
Who: Tim Burke, principal at Rosewood Capital, a San Francisco-based private-equity firm that invests primarily in late-stage companies
Rating: 6 (on a scale of 1 to 10, with 10 being the highest)
"The product clearly has consumer appeal -- it's a healthy, convenient gift at a decent price. But there's very little information on the differentiation of the company versus its competitors on points like pricing and delivery time. Plus, they seem to have no marquee business partners or large customers that could insulate them from a brand-name competitor entering the market. Rapid, profitable growth could also be a problem given the limited geographic reach of each store and the freshness demands of the product. They'll have to open a ton of outlets to build a $100-million-plus business, so the company's economic model is going to be challenged as it tries to scale. The good news is that the company is attacking a sizable market and has the foundation to be a nice small business that delivers solid income if it stays below the radar."
Who: Ken Harris, CEO of Mrs. Beasley's, a Los Angeles-based retail and mail-order business selling gourmet baked goods and gift baskets
"They have a good product and concept with proven consumer acceptance. But this is fresh produce that must be hand delivered, so marketing is going to be limited to a small regional area. The only way they can economically market right now is through direct mail to customers and recipients and through retail locations. A better option (and something they've completely missed the boat on) is reorienting their sales-growth strategy. They should be marketing through third parties -- such as florists, on-line gift retailers, and upscale food establishments -- to leverage their manufacturing and to get product into more places to generate referral business. If they look at themselves as a combination wholesaler and retailer, they might have a winning formula."
Who: Cheryl R. Babcock, director of the International Institute for Franchise Education at Nova Southeastern University, in Fort Lauderdale, Fla.
"They've combined two products -- fruit and flowers -- to create a unique opportunity in the retail-gift marketplace. They'd be smart to build on that and add arrangements for special occasions like anniversaries and retirements to build volume and level out peaks in demand that are concentrated around specific holidays. But I'm not convinced franchising is the right growth strategy. They're projecting only 50 franchises by the end of their seventh year, which is not a strong market presence. And I'd be concerned about encroachment if they plan to position company stores in the same markets as franchisees. They seem to have the cash, so why not just expand with their own stores? Basically, I think the business will survive in select niche markets. But I don't envision it as a nationwide franchise."
Who: Scott Van Winkle, specialty-food and beverage analyst at Adams, Harkness & Hill, a Boston-based investment-banking firm
"The business has already shown a good return on initial marketing efforts. The core question is, How large is the market opportunity? We're talking about fairly atypical gift baskets -- flowers are usually about a visible display of appreciation whereas this product is more an attractive meal. I don't know what the consumer response will be, but I suspect the market is somewhat modest. Franchising is a workable business model. But the business plan will need to more thoroughly address broader marketing, which will be paramount to successful national franchising. They really need to figure out a way to tell consumers that their product is a better alternative than flowers."
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