Huddled at the back of The Cereal Bowl café on a slow Monday night, the three owners of the venture were paging through plans for their next big gamble.
Spread out on the coffee table in front of them was a 56-page questionnaire that will become the basis of a franchise agreement.
For more than a month they've been debating questions such as: How much control will they give to franchisees? If disputes arise, will they mediate or litigate? How much will they require in royalties?
Done right, the document could help turn The Cereal Bowl into a national chain and make the trio rich beyond their years. Done wrong, and it will mean they've plowed some $30,000 in legal fees and countless hours into a pipe dream while they could have been tending to the fledgling venture.
When twin brothers Josh and Kenneth Rader and their childhood friend Michael Glassman, all 25, started kicking around the idea of opening a fast-food restaurant that would specialize in serving more than 30 different kinds of breakfast cereal along with an exotic array of toppings, their aspirations always stretched beyond the café they opened in a strip mall at 1560 S. Dixie Hwy. ``When Kenny started the company he said, `We're not doing this small; I don't care if we have to act bigger than we are for the first few months, we're just going to wing it,' '' said Josh. ``If you go in and say, `We'll start small and then grow, you may never make it.' ''
Thinking big is the reason they've poured so much money into the look and feel of the place. And it's the reason they invested in cups, bowls and napkins emblazoned with their logo when they could have picked up generic ones for a fraction of the price.
``People may think it's stupid for one [single] store to have its brand on everything,'' Josh said. ``But that's what you have to do to build the framework for a franchise.''
The Miami Herald has been following The Cereal Bowl since last October when the three college grads were struggling to turn an empty 1,700-square-foot space into a hip café with flat screen TVs and plush couches.
After months of delays, they opened their doors in February.
Next month The Miami Herald will be printing the last article in this year-long series, which has given readers a peek into the workings of a start-up company.
Over the past eight months, The Cereal Bowl has seen business slowly ramp up as harried commuters, school kids and college students with time to kill have been won over by the simple allure of mixing cereals and topping them off with everything from fruit to chocolate chips.
After surviving the summer lull, The Bowl has recently seen record-setting weekends, with almost 400 clients walking through the door on a good Saturday or Sunday.
Birthday parties, catering events and weekly concerts also have helped pull in customers and boost revenue.
The trio can now boast of being operationally profitable - meaning they pull in more money than they pay out in day-to-day expenses and payroll. But when one-time equipment fees and payment on their 15-year SBA loan are factored in, they are still not in the clear.
But that hasn't slowed down their franchising efforts.
Fueled by positive press reports - particularly a segment on CNN's 360 with Anderson Cooper that ran last month on the twins' birthday - franchise requests have been flooding in.
Earlier this month a pair of investors traveled from California to check out the store and the team. Josh said the meeting left him feeling very optimistic.
``They have stopped at every other cereal café in the country; they are studying the market, and they know what they want,'' he said.
If all goes as planned, the two parties could be signing a contract by year's end that would give the California investors the right, and obligation, to open Cereal Bowl stores along the West Coast.
FRANCHISING FRENZY
The Cereal Bowl isn't the only company trying to capitalize on the concept.
Industry front-runner, Chicago-based Cereality, launched its first store in 2003 and is on the verge of opening its fourth company-owned location in Illinois. Cereality, too, has been getting tons of good press - they're one of the case studies in Chicken Soup for the Entrepreneurial Soul and were recently featured on NBC's Today Show. They also say they are on the verge of going nationwide.
``Cereality is on plan on both the domestic and international front with its [franchising] goals,'' the company's PR agency said via e-mail. ``But [Cereality] is not reporting publicly the number of franchises sold or where they are located.''
A growing number of independent cereal cafes are eager to fill customers' bowls: There's Cereal Central near Ohio State University, The Old Cereal Box Co. in Richmond, Va., The Cereal Port Cafe in San Diego, Calif. and Cerealicious in Toronto, Canada.
CEREAL CASUALTIES
But if selling cereal sounds easy, keep looking:
A place called Bowls - A Cereal Joint in Gainesville was put on notice last year by both Cereality and The Cereal Bowl for potentially infringing on trademarks and patents. Despite receiving strong support from the University of Florida newspaper, it has since shut down.
The Surreal Bowl was was dishing up cereal and '50s kitsch in St. Petersburg until it lost its lease. The business has no published phone number but, according to its MySpace profile, it's searching for a new site.
LEGAL FLAK JACKET
As the cases above suggest, cereal territory can also be a legal minefield. Before The Cereal Bowl opened, it too was presented with an intimidating legal notice from Cereality warning it not to tread on trademarks. The Cereal Bowl fired back a missive and hasn't heard from its competitors since.
But the fear of legal action is always an issue in the restaurant industry, said Josh. And that's one reason the three entrepreneurs chose to work with lawyers from Carlton Fields. The Miami-based firm is pricier than others, but it has specialists in franchising law and the muscle to provide other services.
``It's a big firm with a name that brings a lot of credibility to what we're doing,'' said Josh.
``And if we ever get hauled into court, it's a firm that can defend us.''
CERAL SERIAL
This is the 12th installment in a yearlong series following the first year of a start-up business, The Ceral Bowl. The wrap-up report will appear in Business Monday in October.
MORE ABOUT FRANCHISES
For more information about starting or buying a franchise, visit the International Franchise Association at: www.franchise.org
