06.17.2013 LIBN | Chocolate Works on LI
By David Winzelberg

Joe Whaley’s timing isn’t always impeccable. Facing a big bump in rent when the lease on his Long Island City chocolate factory expired in 2007, Whaley decided to buy a 12,000-square-foot building in Valley Stream and expand.

With more than $1.2 million invested, and just as the first few truffles rolled out of his new and improved Chocolate Works in August 2008, the economy went south.

“We had a lot of corporate customers and it got very, very tough,” Whaley said. “I thought, ‘How am I going to pay for it?’”

A West Point grad who served 20 months in Iraq, Whaley went so far as to return to active duty between 2009 and 2010 to make sure he had a paycheck. The Hempstead Industrial Development Agency and New York Business Development Corp. also helped temper the bad times with tax incentives and loan guarantees.

Rezoning helped a lot, too. Whaley was allowed to create four retail shops in the front of his Rockaway Avenue factory, the former home of a methadone clinic. Chocolate Works now occupies one storefront and leases he others to a liquor retailer, a fitness studio and a nail salon, helping cover the candy factory’s monthly mortgage nut.

The company ultimately survived the downturn and has thrived. Indeed, business is so good that Whaley franchised the concept in April and has already inked deals for four new territories. The first Long Island Chocolate Works franchise is set to open in Commack before summer’s end, with others planned for Manhasset, Brooklyn and Livingston, N.J.

Additionally, a Scarsdale Chocolate Works store is run by a licensee and Whaley is a partner in another store on the Upper West Side of Manhattan.

Chocolate Works is hoping to sign more franchisees, preferably in the New York suburbs, when it exhibits at next week’s International Franchise Expo at the Javits Center.

“Our three initial target areas are Long Island, New Jersey and Connecticut,” Whaley said.

All-in, a Chocolate Works franchise runs between $285,000 and $465,000, depending on size and location. The chain targets retail spaces in the 1,500- to 2,000-square-foot range. In addition to an initial franchise fee of $50,000, the company charges 4 percent of revenues for royalties and another $300 a month for an advertising fund.

The Commack franchisees, Manhattan hedge fund manager Chris Daniels and his wife Rhonda, looked at several food franchises before deciding on Chocolate Works.

“I was impressed by its three streams of sales,” Chris Daniels said. “There are walk-ins, the birthday parties and the corporate business.”

The couple said it is already planning to open more locations starting next spring.

Whaley said each Chocolate Works store hosts between 25 and 30 children’s birthday parties a month, with an average price of nearly $700 per fudge-filled fete.

Chocolate Works also caters to business clientele. The company owns more than 12,000 chocolate logo molds for such corporate clients as Citibank and Goldman Sachs, plus hotel chains and airlines. Franchisees must split any corporate business 50/50 with the franchisor.

Chocolate Works evolved from a Manhattan confectioner called 5th Avenue Chocolatiere founded by Whaley’s dad in the early 1970s and currently operating on Third Avenue at 43rd Street. When the Hershey Co. protested the use of the 5th Avenue brand, fearing confusion with its chocolate bar of the same name, young Whaley renamed the business Chocolate Works.

Hershey doesn’t apparently mind sharing the 5th Avenue name overseas. Whaley owns 28 kiosks operating in Japan under the company’s original name and he’s in China this week to sign a deal to open locations there.

They will all offer the company’s best seller: A signature truffle from a 40-year-old family recipe that fetches $35 for a one-pound box.

Whaley says business has been especially good lately.

“We’re up about 30 percent from a year ago,” he said.