You could think of it as a rebirth. Or maybe it’s one of those COVID-era glow-ups that had people emerging from isolation with straighter teeth and cuter clothes.
Whatever you want to call it, Edible Arrangements is in the middle of a major transformation. A few years ago, the company that introduced the world to bouquets of skewered fruit was in freefall. Now, after a bunch of new product launches, one hired-and-fired CEO, and a pandemic, the company is boasting record-setting sales numbers and a renewed sense of self.
It’s even changed its name: The new Edible sells desserts and doodads of all kinds—not just fruit—and aims to be, as the CEO put it, “the Domino’s of gifting.”
But like most extreme makeovers, Edible’s has its detractors, specifically within its own ranks. A group of franchise owners sued the company in 2020, in part because of the way it has shifted its mission over and over again. (They particularly resented its foray into CBD.) They accused the company of “self-dealing,” of exploiting store owners, and of leaving them out to dry during the infamous “Valentine’s Day disaster.” What looks from the outside like an unequivocal corporate success story belies the drama brewing inside.
Edible Arrangements was co-founded by Tariq Farid and his brother, who immigrated to the U.S. from Pakistan with their family as children. In his teens, Farid worked at a flower shop the family owned. After starting a business that sold computer programs to other florists, he devised a consumable retail product of his own. The first Edible Arrangements store opened in Connecticut in 1999.
The conceptual core of the company was a Frankenstein’s monster, cobbled together from two time-honored gifts: the fruit basket and the flower arrangement. From the former comes the raw materials; from the latter, the artful display.
The resulting creation—a cluster of strawberries, grapes, melon wedges, and pineapple chunks on sticks, emerging from a cradle of kale in a decorative vessel—doesn’t seem like the basis for a successful franchise. It strips its ancestors of their primary assets, inheriting only their perishable flaws. A nicely arranged bouquet of flowers can brighten up a bedside table, while an Edible Arrangement must huddle in the pitch-dark fridge. Whole fruit can last a week or more on the countertop. A delivery of cut fruit cannot: Flavors evaporate with every passing second, leaving each morsel tasting like a ghost of its former, unbroken self, which is presumably why instructions on the company’s website recommend that recipients consume the fruit baskets “right away.”
But the concept’s inherent whimsy (you’re telling me this arrangement … is edible?!) gives it a certain appeal. And, unlike flowers, the product has no romantic or gendered connotations, making it tonally appropriate for co-workers and man-on-man gifting. Its invention marked a new category of food.
And people loved it. As New Englanders rushed to buy one another vases of chopped produce, the company grew. When the first Edible Arrangements franchise location owned by someone outside the family opened in 2001, the Hartford Courant gushed that the business concept was “so basic, simple, and brimming with potential success—you might ask yourself, ‘Why didn’t I think of that?’ ”
Within five years, there were 500 locations, splashing the brand’s Papyrus-font logo on storefronts across the world. According to annual financial filings, by the beginning of 2017, there were more than 1,100 stores, reportedly bringing in over $560 million in annual sales.
Then, the trouble began. Sales declined by the double digits each year between 2017 and 2019, and there was a net loss of around 150 stores. One former Edible franchisee, whom I’ll call Jason, said he saw sales plummet so drastically and abruptly in the five Edible stores he co-owned that he worried his businesses would not survive. (Jason requested anonymity in order to speak freely about the company without fear of professional repercussions.)
“I started thinking about—how do we survive? What’s the exit plan? What’s going to happen if we have to close the stores down?” Jason said in a phone interview, recalling those lean years. “We asked corporate. We’d make a call and say, ‘Hey, what’s going on?’ A generic answer we got from them was that they were getting crushed online, by competitors with digital marketing.”
The marketplace had changed, and the company was scrambling. Digital direct-to-consumer gift shops were popping up everywhere. When users Googled “Edible Arrangements,” the search engine was serving them ads for “fruit bouquets” from 1-800-Flowers.com. And maybe, just maybe, the novelty of sending a friend some underripe fruit on a stick had worn off after two decades.
It took a couple of fallow, anxious years for Edible Arrangements to figure out that its titular innovation could no longer support the business on its own. The company needed to offer more.
In 2018, Edible brought on its first outside CEO, Mike Rotondo, who’d recently led a substantial expansion of another fruit-forward franchising business, Tropical Smoothie Cafe. Rotondo wanted to make the stores destinations worth visiting, with counter-service treats like chocolate-dipped fruit and, wouldn’t you know it, smoothies. (When you’re a hammer, everything looks like a nail.) But the push to increase foot traffic never paid off. A year later, Rotondo was out.
Farid then tapped Cheikh Mboup, a former operations executive at the company, to expand Edible’s offerings as its new president. Cookies, cheesecakes, and cupcakes followed. Also: chocolate, popcorn, stuffed animals, flowers, balloons, cheese boards—basically, if you could find it at a hospital gift shop or bring it to a birthday party, you could now buy it at Edible.
There were a few oddball newcomers to the Edible portfolio. I bought myself a small fruit bouquet for Valentine’s Day this year and, for an additional $14.99, sprang for a “Berry Romantic” digital download of Love Letters, a new live album from Air Supply, the Australian soft-rock duo that had a few big hits in the 1980s. In a press release announcing the collab, Air Supply singer and guitarist Graham Russell issued a poignant reflection on brand synergy: “We are honored to partner with Edible Arrangements this Valentine’s Day to celebrate love, which resonates strongly with our music and fans.”
The company was “just throwing stuff out there to see what would stick,” said Beth Ewen, who has covered Edible Arrangements for the past decade as a senior editor at Franchise Times magazine. “At best, it was crazy. At worst, you could call it desperate.”
When the pandemic hit, all of a sudden, there were a million more reasons for people to order pre-cut fruit for friends and family they couldn’t see in person. And as nonessential businesses shut down in March 2020, Edible found a way to become essential. The company began selling boxes of whole fruit and, for a time, vegetables, allowing franchises to remain open during the mandated closures.
One Edible Arrangements delivery worker told the New York Times in May 2020 that her workload had more than tripled since the pandemic began. Her deliveries were no longer limited to special-occasion gifts for birthdays and graduations, she said, but included fruit bouquets “sent by worried, out-of-state parents who are afraid their adult children aren’t getting vitamins or won’t have food.” (My brother-in-law—and he can’t be the only one—made a practice of sending an Edible Arrangement to any co-worker on his team who contracted COVID.)
At a time when you couldn’t get an Instacart slot, you could still get your bananas, potatoes, and bell peppers delivered from the closest Edible store. Reviews on the company’s website tell of customers who sent the boxes to family members in assisted living facilities and older relatives who were avoiding the grocery store. “We went from like 25, to 50, to 100, to 1,000 of these a day,” said Carey Malloy, who was the company’s CFO when we spoke in late February. (Malloy was the only executive Edible made available for an interview; she has since left the company for another gig.) . Orders have since plateaued, but Edible plans to continue offering the fruit boxes as part of its effort to become a “one-stop shop” that attracts customers with a wide variety of needs.
In short, the pandemic brought about an important realization for the company: The old Edible lived and died by the ingenuity of its signature product. The new Edible has a different primary asset: its fleet of on-staff delivery personnel. The company now sells lots of things you can buy from plenty of other retailers. But, Edible hopes customers will ask themselves, why drive to the nearest Publix for a tray of brownies when Edible will bring them straight to your door? And why buy your hot sauce, Tunisian pastries, and veggie-pulp snack chips from three different specialty shops when you can get them all on one slightly random but familiar website?
It looked like a victory. In 2020, according to Franchise Times, sales at Edible rose some 32 percent, jumping to nearly $587 million from $442 million in 2019—better than the company had done in years. But the triumphant narrative coming out of Edible headquarters was masking a different story on the ground.
To understand the troubles afoot at Edible, you have to appreciate the quirks of the franchise industry. So, a quick primer: Edible is a franchisor, which means all of its stores (save a few company-run locations) are owned and operated by independent business owners. Each of those franchisees pays for the privilege of joining and selling the Edible brand.
Each store pays 5 percent of its sales to the company, according to annual financial filings. On top of that, each store must put 3.5 percent of its sales into a national marketing fund, and another 1.5 percent toward local advertising.
Theoretically, in a broad sense, the franchises could succeed or fail as one company. More sales at a store in Youngstown, Ohio (where Edible’s highest-grossing store brought in more than $2 million last year), means more money for the national advertising fund, which means a stronger national brand, which could lead to more sales at, say, a store in Miami.
But franchisees have no say in the big decisions corporate makes about launching or discontinuing product lines, which must remain relatively consistent across stores in disparate locations. And each store must function as its own business. Franchisees are the ones managing employees and serving customers—and they only make money if their store does. Edible as a whole could have a blockbuster year while some individual franchisees barely turn a profit.
When Edible made a push to get customers into the stores to buy smoothies, some franchisees spent hundreds of thousands of dollars installing new counters, buying new blenders, and making other upgrades—only to see the strategy fail. When the company began selling baked goods, franchisees who’d signed up to run a fruit business had to buy ovens and expend extra labor making brownies.
What’s more, franchisees are typically required to buy supplies from vendors that the corporate entity chooses. At Edible, a lot of those vendors are owned by Farid and his family. Thus, the franchisees were being forced to eat the cost of new machines and new services, knowing that much of their lost money was going back to the CEO.
In 2020, a group of them sued.
Accusing the company and Farid of “self-dealing,” being “motivated by greed and self-interest,” and “acting unfairly and improperly to financially line its own pockets,” the suit says Edible is price-gouging franchisees, in part by requiring them to buy supplies from a series of companies that are all owned by Farid.
It’s not illegal—it is, in fact, pretty common—for franchisors to have exclusive arrangements with affiliate companies. But Edible has a lot of them. Each store’s vases and kitchen supplies, for instance, must come from Farid’s global sourcing company, BerryDirect. All computer hardware must come from his tech company, Netsolace (which the lawsuit claims charges franchisees top-of-the-line prices for lower-quality or discontinued computers).
Perhaps the most notorious affiliate company the franchisees have to pay for is the one that administers the company’s website and ordering system: Edible Connect. Another Farid-owned business, Edible Connect takes 10 percent of every online sale. (Malloy said that online sales account for about 80 percent of current business.)
The fee wasn’t always that high. For a long time, Edible Connect only took 2 percent per sale. But as Edible’s sales numbers dropped, executives ratcheted up the percentage they took. In 2018, the company increased the Edible Connect take to 6.5 percent; in 2019, it jumped to 10 percent. Each bump cut into franchisees’ profits.
An Edible franchisee might have opened a store in 2017 with a business plan that accounted for losing about 12 percent of revenue to company fees. Two years later, they’d be losing nearly 20 percent—before paying for labor, overhead costs, or anything else. Among franchises, “that really stands out,” said Ewen, of Franchise Times. “Fees adding up to 20 percent is very, very out of line.”
The lawsuit says the increase in fees “caused financial devastation” to local stores. (The group of franchisees that filed the suit, the EA Group Advancement Association, did not return a request for comment.)
Malloy said the company was forced to increase fees to cover improvements to the e-commerce platform, which needed to accommodate the growing share of customers who place their orders online. “It’s not about shifting pockets, it’s about growing the pie together,” she said. “And I am confident that the items that are out there, the way that they’re priced, whatever fee is attached to that—there is enough margin for both sides to still be very profitable.”
Franchisees might have more easily accepted the fee hikes if the Edible Connect platform had actually worked as promised. But in February 2020, it failed spectacularly at the worst possible moment in an incident that the lawsuit calls “the Valentine’s Day disaster.” That year, on the Black Friday of the romantic-gifting industry, outages on Edible’s computer systems prevented franchisees from accessing any of the orders their customers were placing online, even as they could see the number of pending orders ticking up. Those orders were delayed or went unfulfilled. According to the suit, franchisees asked Edible to turn off the online ordering system to avoid disappointing customers, but the corporate office refused.
In the end, the franchisees scrambled to refund angry customers, and Edible kept the fees it took off the top of all those refunded or unfulfilled sales. “While the Members were losing money and their goodwill in the community,” the lawsuit states, “the Franchisor was profiting from this widespread disaster.”
One of the many business pivots that angered franchisees—and that was discussed at length in the lawsuit—was Edible’s foray into edibles.
In 2019, Farid had launched yet another affiliate company, Incredible Edibles, to sell goods laced with CBD, a nonpsychoactive component of the cannabis plant, at the stores. (He claims to have learned about the healing powers of hemp—and its booming popularity as a wellness product—while trying to protect the brand’s very convenient trademarked name from “being abused by those within the drug community.”) The company initially announced that it would offer CBD-infused treats at hundreds of stores across the country, but Malloy said the products only ended up at a “small handful” of locations. Very few franchisees agreed to sell the goods, in part because, in some states, they would have had to jump through complicated regulatory hoops to carry CBD.
Jason recalled hearing about the CBD rollout at an Edible convention in Orlando in 2019. He and other franchisees were in a room with corporate executives, talking through financial projections for the CBD-infused smoothies they’d have to sell. “The franchisees were like, ‘Guys, these numbers make no sense. Are you guys even at the stores? Because this is not going to work,’ ” Jason said. “ ‘We’re not gonna make money on this thing.’ ”
Franchisees were incensed seeing Farid’s attentions absorbed by a new affiliate company that had nothing to do with them. Their 2020 lawsuit accuses Edible of using company resources paid for by franchisee fees—including staff time—to launch Incredible Edibles instead of bolstering Edible Arrangements, as the franchisee contract requires.
The barrage of new product lines was “our biggest gripe with [Edible], aside from all the fees,” Jason said. The worst product rollout he could recall was the launch of frozen yogurt treats, which he said came in 2016, along with a mandate that franchisees spend thousands of dollars on a specialized machine. “I think they rolled it out for maybe two months, and then they said, ‘We’re going to discontinue this,’ ” Jason said. “And so we’re like, ‘OK, well, is the manufacturer going to buy it back?’ They’re like, ‘No, but you could just sell it.’ ”
With no knowledge of the resale market for used froyo machines, Jason considered recouping his costs by making and selling frozen desserts at a public fair. But operating an independent yogurt machine turned out to be more trouble than it was worth. “You have to get it cleaned a certain way. The food requirements are different, because there’s dairy involved,” Jason said. “I can guarantee those idiots didn’t know this stuff.”
The CFO, Malloy, said: “I was 22 years at McDonald’s before coming to Edible, and everybody has an opinion on how the company should be run and what type of things and products we should be offering. So I don’t think Edible is any different than any other franchise company.”
All franchising businesses rest on a sometimes fragile relationship between the corporate office and the store owners who buy in. And the pandemic, with its economic uncertainty and stresses on front-line workers, has strained that bond.
The Wall Street Journal reported in November 2020 that franchisees and executives were “bickering publicly as never before.” That year, Econo Lodge franchisees sued their parent company for allegedly overcharging them through a kickback scheme: They claimed that Choice Hotels International forced vendors to pay $25,000 for the privilege of supplying its hotels, then required franchisees to buy from those vendors, who had raised their prices to account for the fee. Some Subway franchisees fought back when the company told them to offer two footlong subs for a total of $10. And Tim Hortons franchisees complained that they were forced to pay excessive prices for goods, including more than $100 above a fair market price for each case of bacon.
Over time, Jason came to feel that Edible did not have the stores’ best interests at heart. What had initially seemed like a mutually beneficial relationship turned out to serve one side far more than—and sometimes at the expense of—the other. By mid-2021, he’d sold all of his Edible stores. Of his time owning the franchises, Jason said, “Sometimes you’re like, I wish I could get out of this toxic relationship where I’m just being taken advantage of.”
The franchisees who sued in 2020 won’t be heard in court. In November 2020, a federal judge dismissed their lawsuit, ruling that their contract with Edible required them to proceed individually through arbitration instead. Franchisees who couldn’t afford to hire a lawyer to press an arbitration case were out of luck—and because arbitration proceedings are private, it’s impossible to tell how many, if any, went forward.
All franchisors must publicly disclose certain information, including fees and affiliate companies, that could help a potential franchisee decide whether or not to buy in. Unlike some companies, Edible does not include data on franchise profitability in those documents, only gross sales numbers.
Those figures, at least, still look really good for Edible franchisees: In 2020, the most recent year for which public data is available, the median Edible store that had been open for at least three years brought in nearly $577,000—about $169,000 more than the year before.
The number of franchises has fallen in each of the past four years, but the company set a record for the number of stores hitting $1 million in sales in 2020, when more than 40 reached the mark. In 2021, Malloy said, more than 79 stores exceeded that milestone.
She pointed out that as companywide sales have risen, the rate of store closure has slowed: “Sales fixes everything, right?”
Jason agreed, in a way. He said he had much more reason to question company strategy when times were lean than when the business was thriving. “If you’re making money, you sort of just say OK, whatever,” he said. “You can tell me what to do, as long as we’re both making money.”