Rocky Mountain Chocolate Factory

If there’s one thing Rocky Mountain Chocolate Factory has learned in the last few years, it’s that the recession hasn’t dampened people’s love for chocolate. COO Bryan Merryman says that although a lot of people have done away unnecessary spending in light of the tough economic times, simple things like chocolate don’t fit into that category.

“Our experience is that people don’t cut back on small luxuries like buying themselves gourmet chocolate,” Merry­man says. Even so, the company has not been entirely immune from the effects of the recession. Rocky Mountain Chocolate Factory has had to contend with slight declines in retail sales along with a lack of financing for new franch­isees. Nevertheless, the company has pulled through, thanks to people’s love of chocolate and a new frozen yogurt franchise concept.

Celebrating its 30th anniversary this year, Rocky Mountain Chocolate Factory was founded by CEO Frank Crail in Durango, Colo., with a single chocolate shop. From there, the company has grown into a nationwide success, with more than 300 stores in the United States and more than 50 in Canada.

The company has become known for producing 300 different types of chocolate candies and other confections, including caramels, truffles, clusters and candied apples. Rocky Mountain Chocolate Factory stores also are known for their unique atmosphere, where customers can see candy being prepared the traditional way in copper kettles on gas-fired stoves.

Customer Loyalty

Merryman says the company survived the last few years with better overall results than many other concepts, but still encountered some difficulties. The company lost about 10 percent of its retail system sales in the previous three fiscal years, something Merryman attributes to the fact that – although customers were still eager to shop at Rocky Mountain Chocolate Factory shops – they made fewer trips to the shopping centers where those stores are located. High gas prices and fewer discretionary funds kept many shoppers at home when they would have been out buying.

What helped minimize the damage to Rocky Mountain Chocolate Factory’s sales overall was that when shoppers did make the trip out to the stores, they tended to spend more per trip than normally. Merryman says this is due to the company’s dedication to quality and its special environment. “What’s always been unique about Rocky Mountain Chocolate Factory is we spend the bulk of our money on product quality as opposed to just spending it on marketing,” he says. “Our stores and the high profile locations they’re in are really our marketing.”

Also helping pull the company through the recent doldrums has been the co-branding efforts it has undertaken with ice cream chain Cold Stone Creamery. More than 40 Cold Stone Creamery locations nationwide feature Rocky Mountain Chocolate Factory-branded products, and Merryman says that number is increasing as it opens more locations.

New Concept

The other significant impact of the recession on Rocky Mountain Chocolate Factory has been on franchising. Be­cause banks are skittish about releasing funds franchisees need to open new locations, growth has slowed down. However, the company expects to make up for that and create a new platform for greater growth through its new Aspen Leaf Frozen Yogurt concept.

Modeled on the self-serve frozen yogurt concept that is popular in southern California, Aspen Leaf allows custo­mers to create their own combinations of flavors and toppings. Merryman says the probiotic dessert fits into the current healthy eating trends and creates strong loyalty in customers.

Also working in Aspen Leaf’s favor is that the stores can be located in lower-rent shopping centers than the Rocky Mountain Chocolate Factory stores, lowering the barrier to entry for many franchisees who otherwise would be unable to jump in. Merryman says the lower overhead also means higher average unit economics, and average unit volumes are among the highest for new food concepts right now.

“We could have hundreds of stores if this concept works,” he says.

Despite the recession, Rocky Moun­tain Chocolate Factory has seen in­creases in revenue from franchise fees and royalty fees over the last fiscal year, and as such has a lot of hope for the future. “All the barometers financially for the company are pointing North,” Merryman says.