Venezuelan pastry chain introducing churros to American fast-food fans

rutlandherald.nybor.com January 26, 2003 (from the Business section)
By DANIEL SHOER-ROTH Knight Ridder Newspapers

Can the churro displace the doughnut and the cinnamon roll in the United States?

What began five years ago as a family business in an eastern coastal town in Venezuela has become a transnational franchise with more than 50 outlets. Now, its owners are betting that they will be able to turn a modern version of the traditional Spanish pastry into the most innovative dessert sold in Florida malls.

“We have rescued the churro; we have reinvented it to compete with any other kind of fast food,” said Ariel Acosta Rubio, president of Churromania, the Venezuelan franchise with international headquarters in Miami.

Just as Burger King, McDonald’s and Pizza Hut have exported the U.S. fast-food culture to Latin America, Latin American fast-food franchises are slowly bringing the flavors of their countries to U.S. taste buds.

As the United States’ Hispanic population and its purchasing power grow, the major metropolitan areas are ready to absorb the new Latin American fast-food offerings, said Marcel Portman, vice president for global development with the International Association of Franchises, a commercial group in Washington, D.C.

Eighteen months after opening at Miami’s Dolphin Mall, Churromania has added a store at the International Mall and is planning to open stores at Bayside and at Westland Mall, all in Miami.

And the chain, which has two stores in San Juan, Puerto Rico, and one in Orlando, Fla., plans to open outlets in Tampa, St. Petersburg, Clearwater, Brandon and Bradenton (all in Florida) and a second one in Orlando, Acosta said.

Plus, it’s on the waiting list at the Dadeland and Aventura malls in Florida and is negotiating franchises in Atlanta and Texas.

This year, the franchise has generated $12 million in sales by selling its sticks of extruded dough, deep fried and sugared, in five countries.

And Churromania has expanded upon the basic churro, offering various sizes and textures as well as a glazed version and some stuffed with dulce de leche, caramel, chocolate, guava and other fillings.

Churromania owns five establishments. The rest are franchises, with a start-up fee of $20,000. Investors must pay between $80,000 and $300,000 to build the shops — depending on the shop’s size — and pay Churromania an 8 percent monthly royalty on gross sales, Acosta said.

Churromania is one of more than 1,000 domestic and foreign-owned franchises created in the last decade in Latin America. Last year, those businesses generated $30 billion in the region, according to America Economia magazine.

“Some franchises in the region are consolidating locally and have decided to go abroad and conquer markets like the U.S., which is very desirable,” Portman said. “Depending on the product, they can compete here.”

South Florida is a favorite target of these companies. Don Pan, the Venezuelan baked-goods franchise, for example, has grown to more than 25 outlets. Other businesses ready to penetrate the South Florida market, according to restaurant consultants, include Bon Ice Cream of the Dominican Republic and the Juan Valdez coffee shops of Colombia.

And Miami is not alone. El Pollo Campero, a Guatemalan chain, has settled successfully in California and Texas, and La Fabula Pizza of Mexico began operations in Denver.

Meanwhile, Churromania, which also operates in Brazil and Spain, believes it can fill a vacuum in malls with heavy walk-in traffic by offering the churro as an alternative to doughnuts, cinnamon rolls, cookies and ice cream.

Eaten with hot chocolate or cafe con leche, the churro is a tradition inherited from Spain. In Miami, they are sold in Cuban coffee shops, from food carts and at outlets that specialize in pastries.

They do well among those Hispanics who are familiar with them, but the challenge facing Churromania in its expansion plans will be to convince Hispanics not familiar with the churro and non-Hispanics of its attractiveness, analysts say.

“The company will have to invest a lot of resources to develop the brand and change the eating habits of buyers,” said William Lesante, a restaurant consultant in Miami. “And that process is neither immediate nor guaranteed.”

Acosta is conscious of the challenge.

“The road is not easy,” he said. “But we have broken the rules: We have been bold.”