Drive-Thrus and Daiquiris

In the hot state of Texas, Eskimo Hut customers are drawn to the c-store's cool attraction -- frozen daiquiris (branded Eskimo Snow) to go. Over four decades ago, the concept started out as a single drive-thru store, but now it's a 17-store chain and a franchise upgrade opportunity for single- or multi-store owners in the Lone Star State who want to get in on the daiquiri action.

"Right from the start, we knew we wanted to sell daiquiris. We see it as a niche in the market -- something we could have success with because others weren't doing it," explained Kevin Morgan, CEO. "There are a few other random places across the state that sell frozen daiquiris [to go], but there really isn't any major competition."

And yet, Morgan admits it took the right urban location for Eskimo Hut to get rolling. When the first store was opened outside of Amarillo's city limits in 1969, it was more of a "drive-thru beer store," he said. It wasn't until the second store opened within Amarillo three years later that the daiquiri concept truly caught on -- and made the difference.

"We really weren't a success until that second store," Morgan said. In addition to fine-tuning the daiquiris and drive-thru service, Eskimo Hut's evolution included incorporating fountain drinks, more cigarettes, and candy and snacks into the mix. These are things the stores sell to be "more of a c-store today," Morgan maintained. "That's been the biggest transformation from the beginning days to where we are now."

So essentially, Morgan now considers his concept to be "a drive-thru c-store with frozen daiquiris to go," and not the other way around. While the daiquiris and other frozen drinks are a focal point, Morgan is quick to point out that every store is different. Depending on the location, the frozen drinks' percent of sales can range from 25 percent to 60 percent.

While Texas law allows Eskimo Hut to sell frozen alcoholic daiquiris, there are two regulations that have shaped certain aspects of the business. Hard liquor cannot be used in to-go drinks, so the daiquiris are wine-based, and as of 2001, the state of Texas initiated an open container law, meaning people can't drive with an open container of alcohol, so Eskimo Hut came up with a simple packaging solution to the business that year. "We kept all daiquiri drinks in a cup, but then we put the cup in a heat-sealed plastic bag," Morgan explained.

Eskimo Snow drinks are available in small (12-ounce for $4); medium (20-ounce for $6); large (32-ounce for $7.50); and a gallon jug (128-ounce for $26.50). Eskimo Snow "Virgin" Daiquiris are also available in the same sizes for $1.60, $2.65, $3.75 and $14.00, respectively. Floaters (an extra shot) are available for $1.25 each, and Tuesdays are known as "Triple Shot Tuesdays," because customers can get three shots for the price of one. Profit margins in this niche drink category range from 60 percent to 65 percent, according to Morgan.

Not surprisingly, Friday and Saturday nights are the busiest for daiquiri sales, and Eskimo Hut can have up to five or six employees working during those times. There is always a minimum of two staff members on duty, but more often than not, there are at least three people working the store.

"We have to run more employees than the average c-store because of the work behind the scenes to make the daiquiris and to be able to service our customers," said Morgan, "I believe this has helped greatly with our success."

But Morgan is quick to point out the convenience stores are not just dedicated daiquiri makers. Every employee is trained in the daiquiri business so that no matter what the customer wants, they can "take the order and see the sale all the way through."

And anything available in the store is also available at the drive-thru.

"The employee opens a sliding glass door to greet the customer and stands next to the vehicle window so that the customer can see the employees' entire body, which makes for a more personable experience," said Brian Dobbins, vice president of business development for Eskimo Hut.

Because of its drive-up service, Eskimo Hut considers drive-up fast food chain Sonic to be one of its primary competitors. "As we try to sell more fountain drinks, we're really watching them," Morgan said. "They really have a big grip on that market because they use great ice. People love their ice, so that's one of the things we're trying to incorporate more into our stores -- getting the Sonic ice into our fountain drinks."

But Eskimo Hut also has plans for others to incorporate one of its drink specialties -- namely its Eskimo Hut one-liter bottled "wine" margaritas -- in blue and green versions manufactured exclusively for the company by Top Shelf.

"We have high expectations for these," Morgan said. "Right now, the way the laws in Texas work, a Walmart cannot sell Jose Cuervo bottled margaritas because they have hard liquor in them, but again, we have come up with a wine-based version that anyone from Walmart, grocery stores or convenience stores can carry."

Regarding Eskimo Hut's store growth plans, the company has just put in place "a grading up for existing convenience store owners, single- or multi-stores, to brand up to an Eskimo Hut," Morgan explained. "Because of the times we're in, a lot of lower-end mom-and-pop stores are on the verge of failing, so we're offering them an opportunity to brand up to our franchising procedures, and they're in our business for a low cost." That franchise fee is $20,000, he said.

But the company also plans to grow through company-owned stores, too. "We're going in both directions," Morgan stated.

The immediate plan is to build up more stake in Texas turf, but with an eye to future out-of-state opportunities, too. "We do want to expand outside of Texas in time, but there are very few states that allow similar alcohol business," said Morgan.

"We can go to Florida with the concept and that will probably be the next state we expand in," Dobbins added.
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