More Than 700 Units Involved : N.Y. Firm Plans to Buy Orange Julius

Custom Creamery Systems Inc. of New York, a franchiser of shopping center-based eateries offering ice cream and other desserts, said Wednesday that it has signed an agreement to buy the operating units of another shopping mall chain--Santa Monica-based Orange Julius International Inc.

Custom Creamery, which had gross revenue of more than $179 million for the first nine months of 1984, said it will acquire Orange Julius International for an undisclosed amount of cash, shares of its common stock and warrants that will be convertible to shares of its common stock.

Orange Julius is selling its approximately 600 stands in the United States, most of them in shopping malls, and 115 stands in Canada. The businesses sell the company’s trademark drink, derived from orange juice, as well as hot dogs, french fries and other fast foods.

“Our company has no plans to change their operations,” said M. G. Khaleeli, chief financial officer of Custom Creamery. “There is a great deal of synergism between the two companies.”

Besides operating six ice cream restaurants in Illinois, Custom Creamery owns about 20,000 vending machines in the Midwest through its American Videotronics subsidiary. Its Flavor Factory division markets a homogenizer that dispenses ice cream and yogurt products.

The company also manufactures and sells dairy products in the Midwest through Hawthorn Mellody Inc.--a unit that recently attracted wide attention when it began printing the pictures of missing children on its milk cartons.

The purchase of Orange Julius, which is subject to approval by Custom Creamery shareholders and other terms and conditions, would team the young, aggressive New York franchiser with one of the nation’s best-known shopping mall tenants. It would also give Orange Julius, which had revenue of $22 million in 1984, a broader financial base, said James J. Bischoff, Orange Julius International president.

“I’m hoping this acquisition will supply additional financial support,” Bischoff said. “To the extent we have discussed current plans, they (Custom Creamery) seem very happy with us. . . . But we have explored looking at additional opportunities for (our) stores outside their current mall locations.”

Orange Julius International was founded in 1929 by a Los Angeles pharmacist who thought he could use his chemistry training to enhance the flavor and texture of orange juice that was being sold by a downtown Los Angeles merchant named Julius. The company remained small until the explosion of shopping mall construction in the late 1960s prompted it to start franchising units across the nation.