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Freshbikes Takes Over Conte's Franchise

Published October 30, 2009

BY NICOLE FORMOSA

ARLINGTON, VA (BRAIN)—The acquisition of P&K Ventures by newly formed Freshbikes Franchising, LLC signifies the end of a messy divorce between Conte’s Bicycle and Fitness and P&K, franchisor of Conte’s for the past seven years.

Freshbikes Franchising acquired the assets of P&K Ventures in late September, soon after the Conte brothers, David and Charles Jr., settled a trademark infringement lawsuit with P&K, ending their partnership.

As part of the settlement, Freshbikes has a limited time to continue operating under the Conte’s name, but will eventually rename the eight franchises.

The Conte brothers are no longer affiliated with the franchises, which are located in Virginia, Maryland and Georgia. They will continue to operate their stores in Virginia Beach and Richmond, Virginia.

“My brother and myself are staying in the bike industry,” David Conte said. “Cycling is our passion. It is something that we’ll always eat, sleep and breathe. It gives us the opportunity in the future to do many more things.”

Freshbikes is owned by Scott McAhren and Jody Bennett, who are already partners in two Conte’s franchises. McAhren said he hopes to boost the franchisees’ bottom lines by formalizing staff training and establishing uniform merchandising guidelines.

While there are no plans to eliminate or change current suppliers, McAhren said the stores, many of which were set up to sell comfort, hybrid and cruiser bikes, would become more focused on road, multisport and, in some cases, coaching.

“Certainly going forward the business model will be based off the model of the Bethesda and Arlington stores,” McAhren said, referencing the stores he owns with Bennett, which carry top tier brands like Cannondale, Specialized, Cervélo, Pinarello and Wilier.

McAhren tapped Howard Ehret, manager of his Bethesda store, to act as corporate trainer/manager, traveling between the franchises to make sure employees are up to speed on day-to-day operations.

“We’re finding there are some training lapses between people opening and where they are now that are somewhat disconcerting. We’ve got some gaps in franchise owner knowledge of POS systems such as how to receive inventory and have everything work on the backend,” McAhren said.

Franchise owners say they hope Freshbikes can offer more return for their 5 percent franchise fee than P&K, which they say didn’t follow up with ongoing support after their shops opened.

“I think the concept of it was good, but the implementation was horrific. I think that’s where Scott wants to come in and change some of that, but he’s got a big hill to climb. In my honest opinion, I think Scott will try and do it where P&K was a lot more fluff than it was actual meat and potatoes,” said Walter Gardner, owner of the Newport News, Virginia Conte’s since 2006.

Ellen Endicott, chief operations officer of P&K, said the organization “fully and energetically” performed its obligations as franchisor.

“This includes complete opening and pre-opening assistance, the continuing development of the franchise concept and franchise network, and significant expansion of marketing activities, as well as intra-network communications facilitation and vendor relationships,” Endicott said, adding that working with franchisees was a positive experience.
P&K will work with Freshbikes in the short-term to ensure a smooth transition, but will not continue to franchise or be involved in the industry, Endicott said.

Brian Murphy, who opened the Conyers, Georgia, Conte’s in March 2008 with two business partners, said he hopes having the franchise under McAhren and Bennett’s leadership will translate into more guidance for daily operations like inventory control and better pricing.

Murphy said his store hasn’t done as well as he expected under the franchise model, perhaps in part because of the cookie-cutter approach to opening shops.

“I think P&K missed the boat a little bit by basing their business model on Charles and David; they’ve had those locations for years. Conte’s in Virginia has 50-plus years behind it. In Georgia and Maryland where they’re opening up, I think you have to adapt and know that every location can’t support a 4,200-square-foot shop with $300,000 of inventory or whatever the case may be,” Murphy said.

The Conte brothers, who took over the family business from their father in 1986, signed a franchise agreement with Penny Jo Pagona, president of P&K Ventures, in November 2002, for $251,500.

The goal was to expand using the successful Conte’s business model and familiarity of the longtime retailers’ name. Progress started out slow, with four stores opened by 2006; David Conte had hoped 15 would be up and running by the end of 2005. After a brief honeymoon period, the partnership began to sour.

David Conte said P&K pushed he and his brother out of the picture, and attempted to run the stores with little industry knowledge. Frustrated shop owners called him for assistance, but he was hamstrung because of the ongoing litigation between the two companies.

The Contes sued P&K last October to get out of the franchise agreement.

Conte said he doesn’t think the franchise venture was a failure, and didn’t rule out trying it again.

“We know we have a good system. We know we have a good model. It’s just you have to have that franchisor to carry it through and that’s the bottom line,” he said.

Conte said he has a good relationship with McAhren and Bennett and believes they will bring much-needed bike expertise back to the franchises.

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