Support and Training
Chado opened on West 3rd Street in 1990 as a small, almost quaint tearoom with few tables, but with 300 canisters of teas from all over the globe lining the walls. In 1993, Reena Shah and her husband, Devan, acquired Chado and began quietly revolutionizing how people in greater Los Angeles think of tea. In 1999, Reena hired well-mannered and highly educated Tekeste (Tek) Mehreteab as a cook. Tek’s conscientious work, honesty, and dedication to tea soon made him a manager and in 2002, he became a partner with Devan and Reena in opening a second Chado location in Pasadena.
Today, Chado’s four locations in the greater Los Angeles area serve as role models in America’s tea renaissance. Reena and Tek’s dedication to sharing their love of tea and refinement has influenced and inspired thousands, and made them major contributors to tea’s growth in the U.S. Chado supports tea education of every sort at every level through projects such as the Los Angeles International Tea Festival and Alson’s Tea for Siblings of the Disabled, which Reena started in memory of her own disabled brother, Alson.
From that beginning, entrepreneur and tea expert, Tek Mehreteab, has been building, managing, and perfecting the Chado Tea business model and operating structure. Since joining the company in 1998, and opening additional locations since, Tek has learned the business from the inside out. The supplier and manufacturer relationships are a strategic advantage, and a key reason why Chado Tea has decided to begin franchising as a vehicle of growth to unify future franchisees under a common system and name.
The system itself is well positioned and poised for growth with a proven track record and a highly experienced operations and management team. The business model is relatively simple to operate, although it requires a bit of staffing and training. All of the products and accessories are sourced from direct suppliers or affiliates and the management and visionary principles are derived from Mr. Mehreteab’s vast experience in the tea business.
The Chado Tea Franchise model will be a fixed retail location providing a wide selection of over 300 different types of teas from around the world. The operating model is simple in nature and operational complexity, but delivers an extremely convenient and quality experience to the customer with great results to the bottom line. It offers franchisees the opportunity to leverage the Home Office (and relationships and affiliates it has built) to enter into the tearoom industry without the risk or effort of finding their own vendors. There is a proven business model that has worked in several diverse markets with high potential for growth of sales and profits.
Locations will range in size from 900 to 2,500 square feet, depending on the market and availability, and will be located in strip centers, downtown districts, and/or stand-alone buildings with rent per square foot (annually) between $36 and $60. Parking should be a priority as the convenience is a large part of this (and any) retail business. The locations should be highly visible from the street and allow for walk-in foot traffic. The layout should be open and allow for the customer to easily find products and see the prominent displays. Each Chado Tea room should have a tea wall that displays a vast selection.
The Chado Tea operating model has been structured with well-defined processes and reordering systems in place, which allows for ease of replication and will make for a straightforward training program with new franchise partners.
The store offers a unique mix of private label SKUs that collectively, cannot be matched by any competitors. For years, the Management Team would travel around the world, adding to its list of teas. This dedication has created customer loyalty and turns the retail environment into a fun and educational experience.
The relationships and affiliations with tea manufacturers allow Chado Tea to receive their products at franchise discounts. These products include a full range of different teas, and other goods and consumables necessary to run the business. Most of the Chado Tea items are avail- able online for easy re-ordering, but there are specific items that rotate or are only available in-store.
A of Chado Tea field support staff will visit each franchisee according to a schedule that is appropriate (based on the length of time that an individual has been a franchisee).
When the franchisee’s store first opens for business, a member of the corporate team will visit the location multiple times over their first year. After that first year, the physical visits will be decreased in favor of teleconferencing and conference calls.
It is estimated that Chado Tea will need to hire one field supervisor for every 20-25 franchises in the field. This is a relatively “de-leveraged” support model that should allow for the high quality of support and guidance provided to franchisees. The Franchisor will incorporate a formalized mechanism for ensuring quality control among franchisees that will be implemented by these field supervisors. Designated staff members will perform supervision of field support duties.
In addition to field support, members of the Franchisor organization will provide the services listed below. The Franchisor must assign a specific person to cover each of these support areas (one person can be assigned to more than one task). The names of support staff members who are officers, directors, or have significant management responsibility in conjunction with franchisees will be disclosed in the Chado Tea Disclosure Document. The Franchisor has the responsibility to assign a person/people to each task during the development of the franchise program.
The Franchisor will provide ongoing training and support in many areas critical to the success of the franchisee's business, including unit operations and maintenance, customer-service techniques, product ordering, suggested pricing guidelines and administrative procedures.
Chado Tea will coordinate development of advertising materials and strategies for the benefit of all members of the franchise network. It will also supply franchisees with consumer marketing plans and materials for use at the local or regional level, and retains the right to approve all local advertis- ing materials that the franchisee chooses to develop. Eventually, all marketing materials and collater- al may be uploaded on to an intranet/cloud server that would provide the franchisees the ability to download documents whenever needed.
The Franchisor or its affiliate will negotiate quantity discounts on behalf of all of its members, passing some or all of these savings on to the franchisees. This will include elements such as retail items, marketing materials and other needed items for operating a Chado Tea location.
A franchisee will provide site selection services including a lease worksheet, demographic details, and visits to approve locations. A franchisee should have at least three locations before the first site selection visit by Chado Tea staff.
Reporting directly to administration, this department is responsible for the financial and legal oversight of franchisees. Chado Tea will be providing support and guidance to franchisees on how to manage their books, but they will ultimately be instructed to hire their own CPA for their individual business.
Ongoing Research and Development
Chado Tea management and leadership will continue to research methods and techniques for franchise operations (including purchasing and promotional schemes) that enhance unit-level profitability. There will be continued research and development on how to better operate the retail locations and how to more profitably manage a Chado Tea franchise.
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