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2020|07

Sweetwaters Grows

Ryan Harrah thought that introducing Sweetwaters to South Carolina might take a while.

by Micheline Maynard

From the August, 2019 issue

Harrah is opening a franchise of the Ann Arbor-based coffee and tea shop in a suburb of Charlotte. But to his surprise, once construction got underway, he began hearing a familiar question: "Is this the same people we had in Michigan?"

Sweetwaters' fame is spreading fast lately. Founded in 1991 by Lisa and Wei Bee, it had seven stores in 2016. That same year, the Bees linked up with Franworth, the Ann Arbor franchise development company, to see how much Sweetwaters could grow.

The answer was: a lot, in many places.

Franworth CEO John Rotche says that through last month, the company had sold 118 Sweetwaters locations to fifty-six franchisees.

The cities include Nashville, Atlanta, Denver, Newark, and Brooklyn, where a Sweetwaters will be located in trendy Park Slope.

Bee says she and her husband launched Sweetwaters with the idea that it could become a multigenerational family business. But they put off a serious growth push while their three sons were growing up.

About three years ago, she says, the couple decided they were ready to expand. To prepare for growth, she says, they'd kept Sweetwaters "really, really focused." They emphasized quality coffees and teas but stayed away from fads like pour-over coffee, which must be painstakingly brewed. "Our guests are not going to wait five or ten minutes for coffee," she says.

That simplicity appealed to Harrah. After a twenty-two-year career in the U.S. Air Force, along with service in the West Virginia National Guard, Harrah brainstormed with a franchise advisor. After meeting with the Bees and Rotche, he committed to opening three stores. Adding to the appeal, it looked like a business he could manage while raising small children.

In fact, Sweetwaters' expansion involves the Bees' second generation. Their middle son, Tyler, got involved while earning a bachelor's degree from the

U-M's Ross School of Business. He delayed a move to New York for a year after graduation to concentrate on the franchise operation.

Bee says the enormity

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of Sweetwaters' growth began to sink in a year ago, when she and her husband were driving back from visiting their franchise holder in Columbus. "I said, 'so, what do you think, Wei?'" she recalls. He replied, "This is amazing, amazing to see our company so far away, and see people enjoying our coffee."

The Bees themselves now own just two Sweetwaters: their original shop at Washington and Ashley and the one in the Westgate branch of the Ann Arbor District Library. The rest are franchised, including one that opened in July in the Ann Arbor-Saline Rd. Meijer.

A Sweetwaters franchise costs between $350,000 and $650,000 to open, depending on the size and location, Bee says. That includes a licensing fee of $49,500. Franchise holders bear the cost of obtaining a lease, building out the store, and hiring staff. They also must use company-

approved vendors. (Lansing-based Paramount Coffee roasts Sweetwaters' brands as part of its specialty coffee division.)

Sweetwaters collects a 6 percent royalty on sales, Bee says. The company provides training and support during the life of the franchised business.

But after several years of breakneck growth, the couple are pushing the pause button. "We have more than enough to handle right now," Bee says. "We want to make sure the stores we open now are on solid footing."

And the relationship with Franworth is over: Bee says that the company will no longer be Sweetwaters' main franchising consultant.

"Franworth maintains a significant economic interest in Sweetwaters and wishes the brand and the Bees only the best as they build on the foundation we built together," emails Dave Keil, a Franworth operating partner.

Neither the Bees nor Franworth would discuss the nature of their financial arrangement--but Bee says that the franchise developer does not have an ongoing economic interest in Sweetwaters.

Bee says they're deciding whether to link up with another company that, like Franworth, would handle the franchise transactions. They're already working with other companies that help potential franchisees find Sweetwaters.

As the company grows, some franchisees are moving beyond what the Bees introduced. Harrah's Indian Land, SC, location will be the first with a drive-up window--though he expects that most customers will still start by coming in to check out the cafe.

With longer summers, Harrah also expects to sell more cold drinks than Sweetwaters stores in the Midwest.

He's eager to see how Sweetwaters' ginger lemon iced tea will do in the Carolinas.    

[Originally published in August, 2019.]