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September 20, 2014

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Recession allows franchises to expand, enter market

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Steve Marcus

Regina De La Pena and her mother, Gina De La Pena, scoop toppings on frozen yogurt creations at Cherry On Top, a new frozen yogurt store in Summerlin. The store, where customers create their own desserts, is the first of the franchise to open in Las Vegas. Even as many retailers and food establishments are struggling to outlast the recession, new franchises are entering the market or expanding their foothold.

New Retail

Jennifer Rodriguez, left, shops with her mother, Maria Quiralte, and 4-year-old twins Anthony and David, right, at the new Hobby Lobby in Henderson. The store, the 441st in the chain, opened Monday in a 51,000-square-foot space formerly occupied by a Von's supermarket. Even as many retailers and food establishments are struggling to outlast the recession, new franchises are entering the market or expanding their foothold. Launch slideshow »

Even as many retailers and food establishments are struggling to outlast the recession, franchises and chains are entering the market or expanding their footholds.

Some are taking advantage of the sharp decline in rent, the availability of storefronts at high-traffic shopping centers and declining competition.

Newcomers to the Southern Nevada market include furniture stores, hobby craft stores, sandwich shops, yogurt shops and restaurants.

“We are doing this for the long term,” said Loren Kreiss, spokesman for San Diego-based Kreiss furnishings, which in July at Town Square opened its 14th U.S. store. “We see the benefits when others are shying away. It is an opportunity for us to get in the market. Our strategy is to double down where we see the growth.”

Some retailers are willing to spend hundreds of thousands of dollars to jump into the Las Vegas market.

That includes Robert Davis, owner of the state’s first Which Wich? Superior Sandwiches, which opened this month in a northwest valley shopping center that had no other fast-food outlets. The Dallas-based chain has more than 110 franchises across the country, and Davis said he hopes to turn his one franchise into 15 to 20 in Las Vegas over the next five to seven years.

“Any business venture is going to be a risk, but this country is founded on entrepreneurs,” Davis said. “You have to remember that there is in any recession a lot of opportunities as well. The opportunity is, we got into a center that didn’t have a lot of competition, the rents were lower and we could get the staffing.”

Todd Miller opened a Cherry on Top frozen yogurt franchise in Summerlin, betting that “just because the national economy and local economy are in recession doesn’t mean a segment of the marketplace can’t be profitable. We are not always going to be in a recession.”

The recession does have its benefits: Miller says his rent is about a third of what was charged several years ago.

Click to enlarge photo

The parking lot was full Thursday at the Hobby Lobby in Henderson. The store, the 441st in the chain, opened Monday in a 51,000-square-foot space formerly occupied by a Von's supermarket. Even as many retailers and food establishments are struggling to outlast the recession, new franchises are entering the market or expanding their foothold.

Miller said he is pressing to open a second location near the Las Vegas Beltway and Rainbow Boulevard.

He will have competition: Tennessee-based Tasti D-Lite, a low-calorie frozen dessert chain, wants to open 15 Southern Nevada franchises in coming years.

Opening a franchise can run into the mid-six figures, with yogurt machines costing $15,000 each and six used per store, Miller said. Financing is difficult to obtain, and business owners have to front the money or get investors, he said.

On the other hand, preparing storefronts for new businesses costs about 20 to 30 percent less these days because of competition among contractors.

Even existing restaurant chains in Las Vegas are finding opportunities during the recession.

Sweet Tomatoes recently opened its third — but smaller — salad buffet restaurant on West Flamingo Road in the Metreon Las Vegas Shopping Center.

Tracy Marks, spokeswoman for San Diego-based Garden Fresh Restaurant Corp., said the company, which has 115 locations in 15 states, won’t let the recession deter its expansion plans. She also cites cheaper space and the availability of premium space that had been taken in the past.

“We are focusing on a market already developed, and it seemed like a great chance to expand so our customers can be closer to us,” Marks said.

A new entry to the market is Hobby Lobby, an Oklahoma City-based chain of about 450 stores in nearly 40 states that opened this week in Henderson.

“Because of the economy, stores have closed and more retail space has become available, which leaves an open building for us to be able to move into,” said the company’s Vince Parker.

Georgia-based Citi Trends, a discount clothing retailer, made its entry into Las Vegas this month with the newest of its more than 420 stores in 25 states.

“We were shipping (to California) anyway, so it made sense (to open a store in Nevada),” said Bruce Smith, the company’s chief financial officer. “And we saw some opportunities in Las Vegas.”

As for concerns about opening during a recession: “It is not like we are selling luxury goods that people shy away from in this economy,” Smith said.

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