HTeaO
Tea in America has a well-documented history, from its introduction in the 1600s, to King George III taking a king’s ransom, to the good, ol’ genteel afternoon tea party, complete with freshly churned butter, some cheese, cold cuts, and, perhaps, a ramekin of a predecessor to Grey Poupon.
A guy originally from the Texas Panhandle is revolutionizing the way we drink tea, the most widely consumed beverage in the world not named water. It is a differentiated beverage concept focused on what one says is “unparalleled iced-tea offerings.”
“Man, it’s so crazy,” says Justin Howe, CEO of HTeaO, a Fort Worth-based tea franchiser that is taking off like one of Elon Musk’s rockets. “‘You sell only iced tea?’ I get that question twice a week.
“How did Starbucks take coffee out of a pancake restaurant and put it on the corner of the street? It’s so obvious. How did no one think of this kind of concept for tea?”
Well, someone did, actually, in the Texas Panhandle.
HTeaO launched officially in 2018 after years of planning. Business is booming with over-the-top demand for the company’s 26 current flavors, all made naturally — no powders or syrups — and with water from a mini-treatment plant onsite at each location. To have good tea, after all, requires good water that tastes the same, regardless of the city.
To date, 435 franchises are either in operation or at some level of the pipeline leading to development.
HTeaO is among the fastest-growing companies in the Southwest, ranking No. 59 in Inc. magazine’s list of private companies based in Texas, Arizona, New Mexico, and Oklahoma. The listing recognizes up-and-coming fast-growth companies in key regions across the country.
HTeaO, one of 166 companies recognized for its growth from 2019-21 and southwest expansion, experienced a two-year revenue growth of 240%.
It’s kind of like Starbucks, HTeaO, headquartered in an office on Markum Ranch Road in west Fort Worth, with a warehouse near Meacham International Airport on the North Side.
Justin Howe
“That’s the only I can describe it and, even then, it doesn’t quite translate,” says Howe. “We fully anticipate being the dominant first-to-market, ahead of a trend, the only one innovating, which is exactly what Starbucks did.”
The stores do actually sell more than tea, but not much. It’s licensed to sell Yeti products. And you can also pick up a healthy snack. A visit to the store in Lake Worth the other day consisted of a purchase of an unsweet blueberry iced tea, as well as a package pomegranate-vanilla-flavored cashews by Sahale Snacks, a very wise choice if you like temptingly tasty cashews. (Who doesn’t?) One can also buy the water.
It’s a do-it-yourself concept. The 26 flavors are lined up with small cups for taste testing. When you’re ready to pour in earnest, various sizes of cups are available and two ice machines — ice all made from the water in the store.
There is a lot to unpack here. Neither Rome nor Amarillo nor Fort Worth were built in a day, and neither was HTeaO. This took years to come together.
Its start was in the Great Recession of 2008, which, of course, spooked everyone alive, big and small.
Howe, a serial entrepreneur with businesses in home building, granite countertop fabrication, and aircraft management (he has a pilot’s license), was one of those. So, were his parents. Howe’s family has a history as restauranteurs since the 1950s. His parents had a restaurant, Buns Over Texas, in Amarillo. Buns Over Texas was a build-your-own-burger concept in the spirit of tongue-twisting Fuddruckers, though Howe is pretty certain that Doodles, Buns Over Texas’ predecessor, was doing that kind of thing before Fuddruckers.
Concerned about business traffic during the downturn, his stepfather had an idea: set up six flavors of tea to lure the thirsty. Create another reason for people to come into the store. When his stepfather proposed the idea, Howe immediately thought of women in his construction company office who would run across town to a fast-food chicken restaurant simply to buy tea.
“They were infatuated with this tea,” Howe recalls.
The tea tactic worked, so much so that sales at Buns Over Texas were up 15% coming out of the 2008 turmoil, Howe says. Kim and Gary Hutchens’ restaurant business was so healthy, in fact, that they bought another pad site and built another restaurant, a new home for Buns Over Texas.
On the end of the new place, Gary wanted a drive-thru to cater to only the tea drinkers.
“He thought maybe if that thing would do a couple hundred dollars a day it’d pay the [loan] on the whole building,” Howe says. “It kind of seemed silly, but whatever. This is what we do. Everybody [in the family] is starting a business every five minutes. Give it a shot … see what happens.”
Gary called it “Texas Tea.”
Three years later, the Hutchens partnered with Howe to expand this thing, to tap into this niche market nationally. “They said, ‘We think this is a real concept,’ and I had been paying attention and thought it was gaining some momentum,” Howe says.
The process to launch HTeaO took six years, starting with building a prototype store in Amarillo. A testing ground for going all tea, all the time, on good real estate, Howe says.
“I thought it was crazy, too,” Howe says, “but we built the store. We had major problems with the model at first, but we solved those. When we started to gain momentum and real volume, we had significant interest in franchising.
“I didn’t know anything about franchising.”
To wrap his head around it, he became a franchisee, buying into three stores of a brand “I wish to leave unnamed.” (An aside: A conversation with Howe is much fun. For example: “I was interested emotionally in the experience of what it was like to have royalty fees sucked out of my checking account like a magic trick on Friday.”)
That was all part of a four-year process to build the back-end infrastructure, including supply chain, for what would become HTeaO, which launched its first corporate-owned store in Midland in 2018.
“We just thought, ‘Hey, man, this is cool. This is a cool vibe, it’s a cool environment,’” says franchisee Bryan Benson, who spoke to the Franchise Times. Benson owns three HTeaO units in San Angelo. He was the brand’s first franchisee in 2019.
That’s the vibe they’re going for, Howe says, “happiness.”
“The first thing that hits you when you walk in is happiness,” Howe says. “People behind the counter who care about your existence. That in combination with the amazing products make this a happy place.”
Howe says data indicates that half the clientele does business through the drive-thru. The others are coming in the store.
There is no place to sit, but, Howe says, “you want to hang out a second.” He’s been told it’s an ideal place to “get away” for a minute, look around, and enjoy the music pouring forth like, well, like an HTeaO Ryan Palmer, our local pro golfing Palmer who is a fan of mixing the sweet regular with yellow lemonade.
“This is like an experience. It’s not just about the tea,” Howe says. “The tea is amazing, the quality is amazing, the consistency is amazing, but when you walk in our store, it’s an experience. It’s like a journey.”
Andrew Hawes’ hiring as director of development was just about simultaneous with the Midland launch. (In addition to Amarillo and Midland, the company also has a store in Dumas, a total of five corporate stores.)
He and his team have been busy because the brand has been trending upward like a celebrity on Twitter, nonstop, ever since. In addition to Texas, franchises are now operating in New Mexico, Kansas, Oklahoma, and Florida.
“A lot of it is phenomena,” Howe says of the demand for the product, “and we don’t quite understand it.”
Hawes says the cost of becoming a franchisee, not including the real estate, whether one is leasing or buying, is about $500,000, which includes the fees, territorial rights, and all the equipment inside a store.
With the rapid expansion, Howe says he got to Fort Worth, a more central locale, as fast as he could.
Earlier this year, two Dallas private-equity firms Crux Capital and Trive Capital acquired a minority stake in the company. The investment, Howe says, will enable employees to participate in equity in the company. Between the corporate office and corporate store operations, Howe says the company employs roughly 150. The investment, he says, also enables a focus on unit-level economics and support of the franchisees, and allows his retirement-age parents to do more of that.
The new partners also bring an operational expertise to the table.
Howe is the company’s largest shareholder, but the equity guys are “real partners.”
“They’re super close friends of mine. We work on a daily and hourly basis. I don’t have … my knowledge is what’s obvious to me, and as we grow to 500 or 1,000 stores, I think it’s wise for me to gain some partners who have been down that road before,” Howe says. “This was all a super carefully orchestrated alignment of interests between every single party.”
All in a partnership designed to moving forward on something they couldn’t ever imagine happening only a decade ago.