Camille's empire copes with setbacks
BY KYLE ARNOLD World Staff Writer
Sunday, February 17, 2013
2/17/13 at 7:31 AM
View the lawsuit one group has
against Beautiful Brands International.
Check out the least and most successful franchises in the United States.
In the past two decades, Tulsa entrepreneur David Rutkauskas has taken a small sandwich shop that started out squeezed under a mall escalator and built a global empire focused on franchising multiple brands.
It's an engaging story, filled with babies sleeping in kitchens and national recognition. But recently there's been bitter to go with the sweet.
Camille's Sidewalk Cafe, named after Rutkauskas' wife and business partner, went from its humble beginnings to a chain of more than 100 restaurants by 2009. Rutkauskas took what he learned about franchising and applied it to other brands he created, including FreshBerry Frozen Yogurt, and created Beautiful Brands International.
BBI began marketing not only concepts created by Rutkauskas, but also became a consultant-for-hire for others with restaurants they wanted to franchise.
That's where the early successful history of BBI, driven by hard work and some insightful ideas, gives way to a more recent tale of the challenges of managing a maturing, and larger, business in a competitive industry.
The economic recession of 2009 was hard on many restaurant chains, and BBI was no exception. In addition to putting pressure on Camille's franchise holders, some of Rutkauskas' new concepts failed to find a market and his consulting businesses saw some clients walk away.
Perhaps the most visible sign locally of the issues the company is dealing with was the closing of the original Camille's Sidewalk Cafe at Woodland Hills Mall at year-end. That restaurant joined a long list of Camille's locations in the Tulsa area that have come and gone during the company's 16-year history.
After years trying to establish the mall kiosk as a reputable eatery and expanding the brand at locations throughout the Tulsa area, Rutkauskas said the Woodland Hills Mall location had to close. He cites an inability of the two sides to reach a lease agreement.
"It just didn't work out," Rutkauskas said.
That location isn't the first Camille's to close. While Rutkauskas is credited with pioneering the fast-casual concept with the restaurant, nearly two-thirds of the chain's locations have been shuttered since 2008, leaving just 36 nationwide after a high-water mark of 107 in 2009.
Those closures left a string of angry franchisees, many of whom sunk their life savings into a location.
Some former franchise owners have taken to the Internet to air various complaints, blaming Rutkauskas and BBl for the lack of success. Those allegations range from questions about how Rutkauskas represented the financial viability of his restaurant brands to charges that he painted a rosy picture to prospects while other franchise owners were going out of business.
And there have been other complaints. A Middle Eastern business group filed suit in Washington state in September accusing BBI of double-selling exclusive rights to the same territory.
A handful of former franchisees have filed for bankruptcy, and some say they have had their lives torn apart by the experience.
In a recent interview with the Tulsa World, Rutkauskas said he may have oversold the Camille's franchise and said his company should have done more to vet potential Camille's owners. He also said that some of the concepts he partnered with simply never gained traction, and in other cases, clients decided to take their restaurants in another direction.
"People have to take accountability for themselves," Rutkauskas said from his Tulsa headquarters near 91st Street and Yale Avenue. "There is no guarantee in life and no guarantee in owning a franchise. No one ever said there was. You have to go operate your business and run your business and try to be successful."
The first Camille's Sidewalk Cafe opened in 1996 at that Woodland Hills Mall location. In the early 2000s, the concept took off and Rutkauskas aggressively marketed the brand to others, eventually setting up his own franchising company in 2006 as Beautiful Brands.
In June 2006, the company reported that it had 63 Camille's stores. By March 2009, there were 107.
Meanwhile, Rutkauskas began acquiring and creating other concepts, such as the failed Coney Beach restaurant, FreshBerry Frozen Yogurt and Dixie Cream Donuts, a partnership with Tulsa's Daylight Donuts Co.
Built on the success of Camille's, Rutkauskas' franchising company BBI sold the rights to hundreds of franchises throughout the country. A handful of groups from the Middle East even began building Camille's and FreshBerry locations in Saudi Arabia with plans for the United Arab Emirates.
At its peak, the BBI portfolio included more than 200 locations across the world in countries such as Egypt and Puerto Rico.
Most of the companies that once partnered with BBI have since parted ways, however, including Dixie Cream Donuts, In the Raw Sushi and Ludger's Bavarian Cakery.
'Someone to blame'
Ranjana Panade and her husband, Arun Dhiri, opened a Camille's Sidewalk Cafe location in Studio City, Calif., in 2006, after paying $25,000 up front and promising 6 percent of their weekly sales to BBI at a location near many of the top movie studios.
"We did some research and we looked at how much money we had and our resources," Panade said. "Camille's seemed like a great concept, and the costs were pretty low compared to some others."
They flew to Tulsa to see Camille's for themselves and were sold after that visit. But she said they soon ran into trouble with a real estate group associated with BBI.
She said they were pushed into a corner location in Studio City with rent costs of about $8,000 a month.
The cafe never had sales of more than $900 a day, she said. The restaurant was geared for a lunch crowd, and Panade said they were assured that Camille's was developing a dinner menu that never materialized.
She said the corporate office insisted they remain open during evenings despite sparse business. Food costs were higher than expected, and requests for support from the corporate offices were ignored.
Rutkauskas said his company provided adequate support to all franchisees, although it was difficult to keep up with some restaurant operators who required constant attention.
Panade's restaurant closed in early 2008 shortly after the beginning of the Hollywood writers' strike.
"Basically, we just ran out of money," she said.
Ranjana Panade and her husband filed for bankruptcy and divorce, which she said were both a result of the strain of the failed business.
Another former franchisee, who didn't wish to be named because of fear of litigation, also said BBI failed to provide adequate support or advice about running the restaurant.
"Once that check had cleared, I couldn't get anyone to take my calls," the person said.
Rutkauskas takes some blame for the closure of many of the locations. He said the company should have done more to make sure that potential franchisees were prepared to run a restaurant.
He points to the three dozen locations still operating as proof that the concept isn't doomed.
"There are plenty of people out there who are still making a profit," Rutkauskas said. "Those restaurants that didn't make it are just looking for someone to blame."
Most former franchisees and business partners contacted by the Tulsa World declined to speak about their experiences. Some said they fear lawsuits from BBI.
"I would be surprised if you find anyone to talk to you," said another person who claimed to be an ex-franchisee.
Today, Oklahoma has just six Camille's locations left. In addition to the Woodland Hills restaurant, high-profile locations on Cherry Street and in Bartlesville are among those that have disappeared.
Rutkauskas said failure rates in the restaurant industry are extremely high in any economy and that the recession starting in 2008 significantly hurt many of his smaller franchisees. He points to companies such as Quizno's and Bennigan's, two national brands that have closed hundreds of locations. Quizno's has closed about 1,500 locations in the last six years and Bennigan's has closed nearly 250 company-owned and franchised locations since 2008.
Some franchisees were lost to loans that fell through while others watched the retail industry around them crumble as major tenants in their shopping centers left. Since many that went under were "mom-and-pop" operations, they didn't have the cash reserves to pull them through tough economic circumstances.
"It's unfortunate, but it's just the way that business goes sometimes," he said. "Now we just have to move forward with the franchisees that we still have."
BBI has stopped selling new Camille's franchises in the U.S. for now and is instead focusing on shoring up the remaining 36 locations. Rutkauskas said BBI is still considering opening company-owned Camille's locations and is developing some new versions of the concept.
Still, BBI has about 80 locations, including about 40 FreshBerry stores, a frozen yogurt store that Rutkauskas started in 2007. The company employs 12 in its Tulsa headquarters.
Rutkauskas also remains optimistic about some of his other concepts. While his gourmet hot-dog idea, Coney Beach, failed, another menu item tried at that store is gaining traction.
Rutkauskas a few years ago bought the rights to a popular fried chicken brand, Rex's Chicken, and is now franchising it.
Curtis Branch, the owner of the local Rex's Chicken restaurant, said that his business has been profitable since it started operating in 2010. The brand has a Tulsa location at Memorial Drive and 111th Street, and another opened in Raleigh, N.C.
"We certainly had a really strong welcoming and a strong start then," Branch said. "I think we've been pretty consistent. (Beautiful Brands) certainly helped in the construction and the buildout. They helped develop protocols and preparation of the food. They've helped us refine that and keep it more efficient over time."
Others also say they have been pleased with their BBI experience.
Steve Anderson, a medical device salesman outside of Sacramento, Calif., is part of a business group that opened a FreshBerry in June 2010.
While he said it has been tough operating during a recession, the FreshBerry was profitable until he sold it last year.
Anderson said now he plans to work as a master franchisee to sell the concept to other entrepreneurs. Operating a new restaurant is time-consuming, he said, but he would recommend FreshBerry franchises to others.
"I think it has been a good brand," Anderson said. "Sometimes it's just a matter of hoping to weather the storm."
As for Rutkauskas, he said the hard times and criticisms have not sapped his desire to be an entrepreneur. He's said he's learned from his experiences and is busy developing new projects.
"I don't want to be known as the guy who started Camille's Sidewalk Cafe or even just a restaurant guy," Rutkauskas said. "I'm a business guy and I want to do more than just restaurants."
Small Business Administration franchise failure rates
|2003-2011 Rank. Company||Failure rate percentage|
|2. Tilden for Brakes Car Care Center||92.86|
|3. Noble Roman Pizza||86.36|
|5. La Paletera||81.25|
|6. Executive Tans||80.85|
|7. Country Clutter (B&B)||80|
|8. Bear Rock Cafe||80|
|9. Blockbuster Video||78.57|
|10. Super Suppers||76.92|
|11. Pro Golf||76.47|
|13. Athlete's Foot||73.91|
|14. Steak Escape||71.43|
|15. Golf Etc.||71.08|
Others: 22. Wing Zone, 65.12; 36. Camille's Sidewalk Cafe, 57.89; 42. Johnny Rockets, 56; 56. Fuddruckers, 52.17; 103. Quizno's Subs, 43.75.
*Source: Printed with permission from BlueMauMau.com based on Small Business Administration data
A history of Camille's and Beautiful Brands International
October 1996: First Camille's Sidewalk Cafe opens at Woodland Hills Mall
September 1999: First Camille's franchisee opens in Oklahoma City
August 2001: Camille's has 20 locations, opens second location in Tulsa
August 2004: Camille's sells franchise agreements in Canada, Puerto Rico
September 2006: David Rutkauskas creates Beautiful Brands International, a restaurant franchise firm
July 2007: Beautiful Brands opens Coney Beach, its second restaurant brand
March 2008: Camille's reports 107 locations, a peak for the company
November 2008: Beautiful Brands Partners signs first franchise partner Daylight Donut Flour Co. to revive Dixie Cream DonutsFebruary 2011: Beautiful Brands reports that there are 72 Camille's in operation
January 2013: 36 Camille's Sidewalk Cafe's are operating
Source: Tulsa World archives
By the numbers
Failure rate, in percentage, of Camille's Sidewalk Cafe reported by the Small Business Administration
Number of Camille's restaurants open nationwide in 2009, its highest mark
Number of Camille's restaurants open today
Original Print Headline: Franchise tales
Kyle Arnold 918-581-8380
Only 36 Camille's Sidewalk Cafe restaurants, such as the one at 96th Street and Riverside Drive in Tulsa, remain open today. MICHAEL WYKE / Tulsa World
The first Camille's Sidewalk Cafe opened at Woodland Hills Mall in 1996. TOM GILBERT / Tulsa World file