David Leonardo is the CEO at Chill-N, a custom-order nitrogen ice cream shop. David’s extensive experience in leadership positions working for multinational brands like Arby’s, Wild Wing Cafe, Pet Supplies Plus, and Burger King solidified his expert portfolio in the franchising world. With a proven track record of successful scaling strategies, David is now set on expanding Chill-N’s franchise to a national level.
David graduated from Boston University with a Bachelor of Science in Business Administration.
Here’s a Glimpse of What You’ll Hear:
- David Leonardo shares how Chill-N nitrogen ice cream works
- The importance of sourcing good-quality raw materials
- A glance at different brand franchise sale processes
- David’s thoughts on implementing strategic decisions for small businesses
- The strategy behind Chill-N’s multi-state expansion plans
- David’s best advice for current franchisors and franchisees
In this episode…
In this episode of the SpotOn Series, Chad Franzen is joined by David Leonardo, CEO at Chill-N. They discuss the science behind Chill-N’s star ingredient, the importance of developing a good sourcing strategy for raw materials, the different aspects of the franchise sale process, and a breakdown of Chill-N’s multistate expansion strategy. David shares his tips on implementing strategic decisions on a small scale and his best advice for current franchisors and franchisees.
Resources mentioned in this episode:
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Chad Franzen 0:20
Chad Franzen here co-host for the show where we feature top restaurant tours investors and business leaders. This is part of our spot on series. Spot on has the best in class payment platform for retail and they have a flagship solution called spot on restaurant, where they combine marketing software and payments all in one. They’ve served everyone from larger chains like Dairy Queen and subway to small mom-and-pop restaurants. To learn more, go to spot on.com This episode is brought to you by Rise25. We help b2b businesses to get ROI clients referrals and strategic partnerships through done for you podcast. If you have a b2b business and want to build great relationships with clients, referral partners and thought leaders in your space. There’s no better way to do it than through podcasts and content marketing. To learn more, go to Rise25.com or email us at email@example.com David Leonardo is the CEO of Chill-N nitrogen ice cream out of Miami, Florida. As a 20-year veteran in franchising for large multinational brands. David embarked on a journey in 2019, to partner with the founders of this small local chain to grow it into a national player in the custom ready to order ice cream segment. In 2022, Chill-N started opening their first set of franchise stores door twist to double their openings in 2023. David, thanks so much for joining me today. How are you?
David Leonardo 1:36
Pretty good. Pretty good, Chad. Thanks for having me. And I’m looking forward to sharing some stories with you.
Chad Franzen 1:39
Yeah, great. Great to have you. Hey, Chill-N nitrogen ice cream sounds both interesting and unique. Tell me kind of how it works. And about the customer experience.
David Leonardo 1:50
Yeah, so what we’ve done is we’ve taken basically a 100-year-old process of serving ice cream and kind of really tilted it on its head by by bringing the factory the ice cream factory into the store. And so historically, what you’ve seen over the last couple 100 years is, ice cream is made in a factory, put in the back of a refrigerated truck and then shipped out to hundreds and thousands of locations across the country. What we do here is we basically use liquid nitrogen to allow us to freeze whatever base we use to make ice cream right there on the spot. And to make your ice cream custom to whatever flavor whatever base, whatever mixins you like. And so we’re actually making every single cup of ice cream right there on the spot for you in under four minutes. And so that’s a little bit of what we’re doing. So there’s a little bit of a science, mad scientists kind of feel to it, you’re actually seeing smoke coming out of the bowls, because the liquid nitrogen is there, basically freezing the base and turning it into ice cream right there on the spot. You’re seeing some piping that’s coming from our liquid nitrogen tank into our mixers. And you’re seeing quite a bit of technology because you can make your ice cream out of multiple bases. We’ve now automated the dispensing of those bases into the bowl. So it took out the human element. So it’s really cool. And as you can imagine, the taste of an ice cream just freshly made right there on the spot. versus one that’s been sitting in a freezer for a week or two weeks, or maybe up to a month is a huge difference. So we’re getting a lot of people that really love the creaminess and the finish of our ice cream. And that’s allowed us to grow quite a bit.
Chad Franzen 3:33
Wow, that sounds amazing. So when a customer comes in, you know, when you walk into a typical ice cream shop like Baskin-Robbins or whatever you see, you know, the buckets of ice cream. So yeah, what does the customer see?
David Leonardo 3:47
Yeah, you don’t see any of that you actually look up on the wall and there’s a menu there. It’s designed like the periodic table, and you can pick the size of your cup. And then after that you pick the base. And we can make your ice cream either out of regular cream, we can make it out of yogurt, tart almond milk, oat milk, coconut milk, and soon we’re going to be introducing sugar-free base. And then we’re after that you pick your flavor and then your mix-ins and so you’re picking all these things in front of you, you’ll see an entire section of mixes, so your Oreos, your your your Reese’s Peanut Butter Cups, all of these mixes. And then next to that you’ll see four mixers. These mixers are connected directly to the piping that brings in the nitrogen. So after the employee pours in your base into the bowl, adds the flavor. He’ll go over to the mixer and the mixer automatically dispenses that liquid nitrogen and starts mixing the bowl and then we throw in the mixes. So it’s really this experience where you’re not seeing any — no freezers are in there. You’re not seeing anything yet. You’re literally watching your ice cream being manufactured in front of you as you go through the process.
Chad Franzen 4:56
And I’m guessing that kind of adds to the experience the view You want to get the ice cream being made?
David Leonardo 5:02
Kids are definitely into that. And they absolutely love it. I like to tell people that it’s definitely a nice experience for people who’ve never seen it. But ultimately, people keep coming back for the quality and the value, right? So I think the novelty of it wears off on our regular customers. But if you’ve never seen anything like it, it is a very, very cool process to watch.
Chad Franzen 5:27
So you joined after this was already kind of in place, this whole this whole process? Is that right? Where you came on board? Or were you part of
David Leonardo 5:33
that’s right, that’s right. So I came on board around seven years after they opened their first location. And so it’s really been a mom-and-pop business since then. And they’ve gotten so much interest from investors that have visited Miami, Florida and visit any one of their five, six locations, that they started questioning whether they should look at franchising as a vehicle for growth. And that’s where I got partnered with the owners, I fell in love with the brand as soon as I saw it. And one of the things that I really liked about it was the technology aspects. So Danny, who’s the founder and my partner, what he’s been able to do is invest a lot of time and effort and trying to streamline the process to increase the throughput. So what happens when you make something custom is that you know, you’re getting great quality, but sometimes people have to sacrifice a little bit on the time. So that person in the regular Baskin-Robbins is scooping it up. And then in a minute or two, they have you have your cone and you have your ice cream. In a regular nitrogen shop, you can probably wait up to five, seven, ten minutes, because we’ve introduced technology into the dispensing of the cream and the mixing of the bowls and on the dispensing of the liquid nitrogen. All of that can be done in under four or five minutes. And so that, to me is really one of the things we’ve been working on since I joined the company to increase the throughput. And so we’ve been introducing, we’ve been changing quite a bit since I joined the company just to make it more franchise friendly and to allow us to scale. But but it’s been a wonderful journey. And yeah, Danny is really a lot of the brains behind me. He’s currently the CEO of the company and my partner.
Chad Franzen 7:10
So four minutes, a four-minute Wait, isn’t that a huge amount of time? I mean, I guess it’s it’s more than it would take to scoop up the ice cream out of the out of the bucket or whatever. Is that would you say that the taste is worth it or and your regular customers have found that to be the case?
David Leonardo 7:26
Absolutely. I mean, that’s the reason they come back. Right. So again, the experience will get you in there. And it’s a wow factor for a little kid and the mom and stuff but the creaminess and so the right combination of liquid nitrogen in the bowl, combined with the base. And there’s algorithms that kind of determine how much of should be in depending on the base, depending on the fat content. But all of that finishes with what you end up as with something between a gelato and an ice cream. So it’s not as creamy as a gelato, in terms of the softness of it. And it’s not as hard as an ice cream. And so you have a really nice finish to it that that people absolutely love. And then the other thing that we’ve that all of this has allowed us to do is really focus on the quality. So we have, we have better quality cream. So we have our dairy farms right here in Florida. And so we go from cow to cup in about 10 days. And so even sourcing of our raw materials is something we spend a lot of time on. Our vanilla bean comes in from Madagascar. So we do spend quite a bit of time making sure that the quality is something that you come away feeling that it’s worth the repeat visit.
Chad Franzen 8:37
This sounds like quite an idea. We have nothing like as far as I know, we have nothing like this where I am in Colorado. Do you know I know you weren’t there when they started. Do you know like how this whole thing came about? What what made them decide to go this route?
David Leonardo 8:51
Yeah, so like, like a lot of great companies. A lot of it started with watching someone else do some moderation of it and saying I could do it better. Right. So my partner Danny was graduating from the University of Florida and was taking a gap year to study for his MCAT he was considering going to med school comes from a very, very entrepreneurial family had started his own company as a child with his father. And so he’s got a buddy of his that tells him “Hey, Danny, you have to come up to Jacksonville with me. There is an ice cream shop where someone is pouring liquid nitrogen into a bowl whisking it by hand and turning it into ice cream right there on the spot. And there’s a line right outside the door.” And so he goes up there on a drive. Remember he’s taken his gap year so he has a little bit of time on his hands. He goes up there falls in love with the brand and comes back home and and pitches this idea to his parents and his parents, you know, literally made him put together a pitch deck made him you know, promise that if they fund this venture and it doesn’t go well. That he’ll promise to go back to med school promise to go to med school and so the first one was a home run in Pine Crest, Florida we just, we just celebrated 10 years and that store. And we’re now just opened our 11 store this year. And so we have five more that are scheduled to open by the end of this year. And we’re actually just starting to open stores outside of South Florida as well. So we got stores opening up in Orlando in Nashville in we have stores in Texas that are currently open and New Jersey and Hilton Head. So we’re growing.
Chad Franzen 10:28
Okay, yeah. Awesome. Hey, you had a lot of experience in franchising before joining Chill-N you were with? I was looking at your LinkedIn page. Arby’s, Wild Wind Cafe pet supplies, plus, probably some other ones. Can you tell me kind of about your franchising journey and your journey prior to joining Chill-N?
David Leonardo 10:44
Yeah, so, you know, I’ve been in franchising for 20 years. And, um, but prior to that, I was in investment banking, and then kind of got learned to South Florida during the.com craze of the late 90s. And some of my friends were starting to calm down here and, and I got involved in a startup company down here, that for about a year and a half before, before, like most dot coms that went belly up, and I found myself looking, really falling in love with South Florida and looking for an opportunity. And at the time, Burton’s world headquarters is here, they’re still here. But at the time, they were looking for someone with deep M&A background and finance, background and business development to help them buy and sell restaurants. And so that’s how I got introduced to the franchising world, initially on the business development strategy side. And soon enough, shortly after that, I got introduced to franchise development, and I’ve been kind of a franchise development strategy. Experts since then are developing that expertise over the long term. And so what I’ve gone from there to Arby’s and done some international work, and then Wendy’s, and really, really kind of grown within the franchising world. But what I really felt that I was drawn to is smaller brands or brands that need some work and restructuring and putting systems in place. And so I’ve been able to go into some brands and build the franchise development department from scratch. I’ve been able to go into brands and kind of restructure some things. And so I really thought that when I saw this opportunity here, taking a company that has never done franchising, and really putting all the pieces that that a company needs to have in place in order to start selling franchises. I jumped at that opportunity, it was really a way for me to get back into a startup phase and really, really play more of an impact than being part of a large conglomerate.
Chad Franzen 12:40
How does your approach differ from you know, like Arby’s? Everybody knows what Arby’s is compared to a relatively unknown place? Like Chill-N?
David Leonardo 12:50
Yeah, well, very different. I mean, my, the sales process is very different. Because, you know, I remember selling franchises with Burger King and, and Arby’s and the brand is carries so much weight, that there’s not as much validation that you need, right? People can, can drive within a couple miles and see many locations. And so really, you know, it differs in sense that, you know, I’m working with a lot less capital to grow a business, I’m much more resource starved as we, we wear multiple hats in this organization. And, and so that, but that’s the nature of a startup, right? That’s the nature of a startup. I like to say we’re the oldest startup right, we’ve been around for 10 years, but there’s the franchising side of this is fairly new. And, and it’s been an interesting journey, right? I joined the company in 2019 started really putting this infrastructure together, and then 2020 came and we all know what happened then. So it’s been it’s been an interesting journey, but, but I’d love to say that all that is paid off in 2021 We had an amazing year with selling 14 deals, and and 2022 we started opening up 2023 We’re continuing to open them and sell more deals. And so little by little, we’re gonna get get up there, right?
Chad Franzen 14:05
Did you you came on board and 2019-2020 was a terrible year for a lot of restaurants. How did it affect you guys?
David Leonardo 14:13
It actually ended up being a good year for us financially. And I’ll tell you that hit ice cream historically been an anti recessionary business, right. So you may not have money to go out to an expensive restaurant, you may not go out on vacation or buy that extra car, but you know, you’re gonna always have some money for either the movies or an ice cream. Maybe not the movies during the last pandemic, but but an ice cream. It’s amazing how much business we did. One of the most interesting things that that happened to our business during the pandemic is our delivery business went from doing about 9% pre-pandemic, to almost as high as 65-70%. During the peak of the pandemic. We’re still somewhere around 25% of all of our business is being executed by delivery. And the reason that works to our advantage, many of your listeners may say, how do you deliver ice cream and I even thought to myself, is because we controlled the liquid nitrogen in our store, we make your ice cream like anybody else. And then we dip your entire cup in a canister of liquid nitrogen and it comes out rock solid. And it’s good for about a 15 minute drive time. 15-20 minute drive time. So it’s by the time it gets to your house, it should be as if we’re handing it over to you on the counter. And so there’s no special packaging, there’s nothing and that that I hate to say but the pandemic actually allowed us to introduce that option to many people who would have never considered delivery as an option.
Chad Franzen 15:41
It sounds like this per a mom-and-pop shop, this is a company that’s really kind of forward-thinking, you know, always kind of solving problems, even if they aren’t aware that they exist.
David Leonardo 15:50
Yeah, well, look, Chad, I think that’s one of the advantages of working for a smaller company as well, right. So we got, we got presented with the pandemic. And we immediately had to change so much of our business, right, we had to, we have to close indoor dining, we had to move the register to the front, within within less than a week, we had entire website set up to purchase online pick up in store, or we brought on three or four more delivery partners. All of this happened literally within a matter of a couple of weeks of this happening. And you can imagine what happens when you’re a part of a large, large company. It’s kind of like, you know, hitting, you know, turning around the Titanic in a bathtub, it’s just it’s a lot harder to kind of implement strategic decisions. And so that’s one of the things that I love about working for a small company like this. And, and it’s, it’s really nice to see franchisees that we brought on really enjoy that and really like that, because, you know, they want to be part of a company that’s forward-thinking that’s thinking ahead. And obviously, with the sugar-free stuff with, you know, thinking and listening to our customers, what is that you want? Because at the end of the day, we can make any ice cream in our store. And so one of the things that’s happened in the ice cream space over the last, I don’t know how many years is that there’s a fad to the ice cream, right? Oh, we have this kind of ice cream. And that’s a fad, right, we have this kind of ice cream. And the truth is, is that we can make any kind of ice cream in our store. So if there’s for some reason, a flavor that becomes extremely popular popular out there, we can bring it in if there’s we can make gelato in our store in the future. If we want to make gelato, we can make any type of ice cream because all that nitrogen is allowing you to do is really freeze the base and turn it into ice cream. And then we can show the texture that we want it to end up in.
Chad Franzen 17:36
What do you what do you look for in a franchisee?
David Leonardo 17:40
Yes, it’s great question. Well, first and foremost, I think we want to make sure that they have the financial capabilities to open a store. Our stores right now are averaging somewhere between 450 to $550,000. To open of that amount, you’re probably looking at around 200 $200,000 of that $240,000 of that is construction. So and I’m talking to you about construction down here in South Florida, I’m sure in other parts of the country, the construction can be a little bit more attractive. But so we’re looking for someone who could come to the table with enough equity to qualify for a loan, or could potentially look at you know, saying, hey, look, I want to open two to three stores. And this is a really good equity investment for me, because the returns are attractive. To give you a sense of our financials to your customers to give you a sense, we are averaging somewhere around $670,000 a year in sales, which for the ice cream space and the dessert space is pretty, pretty attractive. And we call our our EBIT DOT number our cashflow at the end of paying off everything roughly ranges between 16 and 20%. So those are those are the numbers that we’re at right now. And we feel that as we grow, we have more leverage with our vendors. We can hit that above 20% Mark, as we start scaling the business.