The Beverage Category Sweetens as Consumers Crave Variety and Seek Flavorful Iced Tea Across the U.S.
HTeaO, the country’s leading iced tea-only franchises, breaks through the QSR beverage industry with a simple and bullet-proof business model.
When we think of the beverage industry, coffee is typically what comes to mind first. As a core component of most Americans’ diet, coffee has become an almost impenetrable business concept. Armed with entrepreneurial intuition, Justin Howe, CEO and founder of HTeaO, changed that when he reverse-engineered profitability to validate the untapped iced tea category within the QSR-space.
The incubator process began during the 2008 recession. Justin’s parents, Gary and Kim Hutchens, were operating a burger concept called “Buns Over Texas,” and were looking for creative ways to increase their sales. Deciding to introduce six unique iced tea flavors to the menu, they were surprised to see so many customers coming in specifically for the iced tea. In order to test the viability and profitability of the business model, they created their first stand-alone iced tea shop known as “Texas Tea.” Seeing the success after two years, Justin knew it was time to reimagine what could be made possible for this niche beverage option.
As a serial entrepreneur, Justin has founded over 20 companies, and spared no expense on the initial prototype locations. Taking more of an analytical approach, every aspect of the business was tested, monitored, and perfected. From the back-end support, prime real estate, operations, marketing, finance, supply chain to product quality. He wanted to prove that the concept could be successful locally before franchising the concept to scale nationally. At one point he even turned down 25 franchise candidates that were ready to sign, because he was not convinced the model was as efficient as possible. In 2018 the HTeaO brand was officially launched, after almost a decade of preparation and refinement.
“We’re a data-driven company. It was crucial to start with research and development and delay expectations for profitability to create the right business model,” said Howe. “If you start a business with the goal for profits you’re starting a job, not a scalable business. As I was building the brand, I was learning how to be a franchisor, and knew I wanted to be the one to go before them with thinking of everything.”
Being first-to-market, Howe and his team knew they had to problem-solve in order to make a mark within this niche category in the beverage market. Overcoming obscurity will always be an area of focus to ensure HTeaO remains ahead of the QSR trends.
Each HTeaO location offers 26 proprietary flavors, all made using completely natural ingredients. Recognizing the importance of consistency in products, each location is equipped with their own water plant, filtering out all impurities. Nothing in stores is served without going through the filtration system, including the ice. With iced tea rarely having been a primary menu item for most restaurants, not many distributors place a large focus on the ingredients needed to produce it. In order to ensure each location gets the quality ingredients needed for their iced teas, HTeaO created their own supply chain, which has proven to be much more cost efficient and sustainable as they launch across the U.S.
Currently operating in 13 states, HTeaO recently opened their 50th location this year, and has over 400 franchise agreements signed. The following states have signed franchise agreements with sites secured and/or under development: Alabama, Arkansas, Arizona, Colorado, Florida, Georgia, Kansas, Louisiana, Missouri, New Mexico, Oklahoma, Tennessee and Texas.
As one of the leaders in the iced tea industry, HTeaO sets the standard with only using tea leaves and raw ingredients. People are becoming more health conscious as they think about what is going into their bodies, making iced tea a growing option over things like soda and coffee. As the demand strengthens, HTeaO will continue to innovate through new drink offerings, flavors and seasonal offerings. They currently offer a variety of healthy grab-n-go snacks in addition to their teas.
The community-driven organization also believes in brewing with a purpose. Locations are constantly offering promotions and ways to give back to their communities and local charities. Almost every October, HTeaO has partnered with the Ryan Palmer Foundation and allows guests to ‘Round-up with Ryan’ to support the Ryan Palmer Breast Cancer Initiative. With only 50 locations currently operating, the goal was to raise around $50,00. By the end of the campaign over $70,000 was raised. In addition to charitable initiatives, many locations will recognize local officials and prominent members in the community by giving back on appreciation days, and offering free teas to those being honored.
“Supporting our communities and franchise partners is a core tenant of this brand, and a large contributor to its success,” said Howe. “We are open and honest, and welcome all ideas. We are not married to one philosophy, but value input so we best know how to meet everyone’s needs.”
The beverage industry is noticing that many consumers are searching for more plant-based and dairy-free options, and they want to lower their sugar intake. “Better-for-You” beverages that focus on fresh ingredients, clean labels, lower amounts of sugar, minimal calories, and caffeine alternatives are currently in high demand, a trend that HTeaO has been capitalizing on. Focusing on all-natural ingredients and fresh brewing their tea, HTeaO is passionate about offering a beneficial product that consumers enjoy.
HTeaO is focusing on developing locations across the U.S., with their current focus on Florida and the East Coast. Having recently hired a Franchise Candidate Advocate located in Florida to spearhead development in the area, the brand currently has one location open in Florida with a second opening within the next few months. This is one of the first major steps the brand has taken towards their East Coast expansion. With over 400 franchise agreements currently signed, the brand hopes to have 500 locations open by 2027.