A Texas summer and iced tea go together like fall and football.
So it should be little surprise that a tea-based brand based in Fort Worth comes in at No. 59 in Inc. magazine’s list of private companies in the southwest.
According to the magazine, HTeaO saw a two-year revenue growth of 240% over the past two years. HTeaO also ranked as one of the fastest-growing franchises in the March/April issue of Entrepreneur magazine, growing from 35 franchises in 2021 to 60 in 2022. More than 80 locations are scheduled to open this year.
“To have our brand listed along some of the largest-growing franchises in America just shows how much larger our footprint on the iced tea industry has grown the last few years,” said Andrew Hawes, chief development officer of HTeaO.
HTeaO launched officially in 2018 after years of planning and relocated from Amarillo to Fort Worth the next year. HTeaO is headquartered in an office off Markum Ranch Road at 1322 Ranchers Legacy Trail in west Fort Worth and has a warehouse near Meacham International Airport.
The move to Fort Worth resulted from the need to be more centrally located.
“We can fly out to a franchise in the morning and be back in the evening in most cases,” said Justin Howe, CEO of HTeaO.
The company employs about 150 in its corporate offices and corporate store operations.
HTeaO is ambitious. The company wants to do for tea what Starbucks did for coffee.
“Think about it. Before Starbucks, coffee was something you basically gave away for nothing,” Howe said. “Tea has been the same way. Most restaurants don’t spend any time focusing on their tea. That’s all we do.”
Tea company’s roots
HTeaO began in Amarillo where Howe’s family was in the hamburger restaurant business. Howe worked in the family’s restaurant, Buns Over Texas, but eventually became a serial entrepreneur in businesses like home building, construction and aircraft management. When the recession of 2008 hit, Howe’s family asked him to set up a store selling iced tea on some property near the family’s restaurant.
“I thought the idea was great because I knew in my construction business that the women in the office were always going out to get tea, particularly in the summer,” he said.
The tea location, then called Texas Tea, opened in 2009 and did well, too, paying for itself much faster than expected.
“We’d look at the transaction volume each month, and it just kept growing,” Howe said.
Howe thought the idea had promise, but knew the family also had an established brand in Buns Over Texas. So the family built another prototype store in Amarillo.
“We had problems, but we wanted to work them out before we offered it as a franchise,” Howe said. “I invest in something, it’s my money on the line, but asking other people to invest theirs, man, that’s some responsibility there. I wanted to make sure it worked.”
The process to bring HTeaO to the franchise market took about six years. In 2018, the family built a company-owned store in Midland.
“We didn’t really know anyone in Midland, so we wanted to make sure it worked in a place where we didn’t have any friends or family,” he said.
It worked. The Midland location was the first site to bear the HTeaO name.
The company spent a lot of time on the name, the brand and the logo.
“That logo was built like 760 times, I’m not kidding,” Howe said. “We were relentless. I could tell you the story of each iteration of that logo.”
Since neither Howe nor his family had any experience in franchising, Howe bought into a franchise to see how it worked. Howe didn’t name the franchise, but said he learned a lot about what to and not to do.
“It was an education,” he said. “A very expensive education.”
Hawes was hired as director of development in 2018. In addition to Texas, franchises are now operating in New Mexico, Kansas, Oklahoma and Florida, with some to open in Arizona soon. The brand has grown from 35 franchise locations in 2021, to 60 in 2022, to more than 80 this year. More than 100 more are on the drawing board.
There are no locations in Fort Worth yet, but they are close, in Burleson, Bedford, Arlington, Lake Worth and Hurst.
“We’ll get here,” said Hawes. “We just need to find the right partner.”
The business is doing well. The company didn’t have to close any locations during the pandemic.
How company is expanding
The costs for a franchise, not including the real estate, is about $500,000, Hawes said.
Sara Waskow, a franchise consultant at FranNet in Fort Worth, said brands grow fast for a number of reasons.
“For someone looking to get into a fast-growing brand or category, they should examine how that is going to work for them,” she said. “Even a fast-growing or desirable concept can tax someone’s resources.”
To help fuel the expansion, two Dallas-based private equity firms, Crux Capital and Trive Capital, acquired a minority stake in HTeaO. Financial terms of the transaction were not disclosed, but two members from the firms joined the company’s board of directors.
The investment will help HTeaO accelerate geographic expansion, attract talent and improve technology to enhance the quality of service, Howe said.
Creating an experience
The company’s 26 current flavors are made naturally with no powders or syrups. The water in each location is treated and filtered so that each glass tastes the same. The ice is made from that same water.
“Water in San Angelo tastes different than water in Bedford, so we have to make sure it’s the same, or our product won’t taste the same,” said Howe. “You want your sweet coconut tea in San Angelo to taste the same as it does in Amarillo.”
About half the customers use the drive-thru and the rest come in the small interior space.
“Like Starbucks, like other good franchises, we want the customer to have an experience when they come here,” Howe said. “They may be getting away from their job for just a few minutes that day, and I want them to have the best experience possible at HTeaO.”
While different flavors of tea are the primary offering, HTeaO also offers pink lemonade and a Ryan Palmer, a mix of lemonade and tea and named after a PGA tour professional from Amarillo with a nod to the classic Arnold Palmer drink. The company recently added coffee to some locations.
“As we expand to colder climates, that may become a big seller in the winter, so it’s doing well,” Howe said.
About 85% of the company’s sales are from iced tea. In mid-May, the company said it sold 330,000 glasses of iced tea in one week. That will likely increase as summer heats up.
“For real iced tea drinkers, they don’t care if it’s 100 degrees or 15 degrees, they’re going to drink iced tea,” said Howe.
Among HTeaO’s offerings
- The Ryan Palmer (mixes sweet regular with yellow lemonade)
- Sweet Mango Fresco
- Texas Chai
- Sweet Watermelon
- Sweet Georgia Peach
- Coconut Sunset is the June special, a blend of Sweet Coconut and Pink Lemonade.
Bob Francis is business editor for the Fort Worth Report. Contact him at bob.francis@fortworthreport.org. At the Fort Worth Report, news decisions are made independently of our board members and financial supporters. Read more about our editorial independence policy here.
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