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Should You Buy a Carvel Franchise?

NEW YORK (TheStreet) -- Carvel Ice Cream, the 80-year-old ice cream chain known for its Fudgie the Whale and Cookie Puss ice cream cakes, has found itself, once again, in an industry that is full of frozen yogurt chains. But as oversaturation and perhaps fro-yo exhaustion starts to hit consumers, can the storied chain re-emerge?

Growing up, I lived in a town that had two options -- Carvel or the one frozen yogurt store (this, of course, was back when frozen yogurt had its first wave of popularity in the 1980s). It's hard to forget the thrill of the experience when visiting a Carvel store. I can remember loving its soft serve ice cream cones, especially with colored sprinkles, ice cream cakes for birthdays and even its "thinny thin" ice cream options. (Boy, did that marketing succeed!). Today, though, I rarely eat ice cream and when I do want a sweet treat it's likely going to be frozen yogurt. But maybe I don't eat Carvel anymore because the nearest location is about 10 minutes away -- too far when a fro-yo chain is just down the block. But after eating the brand's new Salted Caramel soft serve ice cream flavor while filming a video with Carvel, I might be looking closer for my nearest store.

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The lack of locations is a problem that Carvel is planning to solve. With 400 stores (two-thirds of which are full-service locations, the rest are "express" shoppes), the company said it sees an opportunity to expand full-service locations in its home regions of the Northeast and Florida, and it sees an even bigger opportunity to open smaller "express" locations nationally. Carvel is actively recruiting new franchises into the system.

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"We believe there is a strong opportunity to grow our [stores] especially in the core markets. We're seeing a very positive customer response" and believe Carvel can take market share in the ice cream market, said Carvel President Scott Colwell.

Carvel is competing in an industry that over the past few years has been dominated by the rapid growth of frozen yogurt chains. Carvel believes the new store design it debuted last month will breathe new life into it as it is up against hipper concepts like Menchie's Frozen Yogurt, Yogurtland and even Red Mango that are still growing at double-digit paces in terms of sales and store count, according to Technomic, as well as dominant ice cream store brands like Berkshire Hathaway's (BRK.B) (BRK.A) Dairy Queen, Dunkin Brands' (DNKN) Baskin Robbins and Braum's Ice Cream.

The new Carvel stores will "enhance guest experience and spur a new wave of growth for the iconic brand," Carvel said in a press release. The new shoppe design features "updates that showcase Carvel menu items, including new dipping cabinets and a topping bar, as well as a large display area for the brand's signature ice cream cakes. Carvel has also added digital menu boards to communicate the company's broad variety of treats."

Still, "the remodel is important in keeping Carvel competitive and keeping it current, especially when your brand has been around for 80 years," Colwell said. "With our full-service shops we think there is a big opportunity to still fill in the Northeast, the New York market [and] surrounding states ... and then with our express shops we believe we can grow nationally and we already have a number of shops out there. We're in 26 different states." The updated store design is specifically for new stores, but Colwell said that over the next several years existing stores will also be re-imaged.

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