Crawl spaces: Fred Rhyme's longtime mealworm and cricket farm is alive with business from customers like TV's "Fear Factor," pet stores and zoos nationwide. (Small Business).

IT may make "Fear Factor" contestants cringe, but Fred Rhyme has no qualms about taking 100 worms out of a basket and watching them crawl around on his hands and arms.

"It's really quite pleasant," said the 77-year-old Rhyme.

For more than 50 years, he has spent nearly every day surrounded by millions of mealworms and crickets in row after row of stacked containers. And through the decades, his Rainbow Mealworms & Crickets has grown from a garage hobby into one of the largest wholesale suppliers of mealworms and crickets to pet stores, zoos and aviaries.

There are so many mealworms that Rhyme put a sign outside one of the buildings in his Compton complex welcoming people to "Worm City, Population 990,000,000."

He has been buying up adjacent bungalows along the narrow street by the Alameda Corridor and converting them into mealworm and cricket farms to support his business. Each bungalow is stacked, floor to ceiling, with trays containing mealworms or crickets, with the occasional table for workspace.

Rhyme has also made some forays into Hollywood, supplying mealworms to the likes of Michael Jackson (at his Santa Barbara ranch) and Hugh Hefner (for his menagerie at the Playboy Mansion in Holmby Hills).

And, yes, he supplies 22,000 mealworms at a stretch to the producers of "Fear Factor." Unlike other customers, the Fear Factor producers rent the worms by the hour. They are then either shipped on to other customers or returned to Rainbow's Compton facility. "I guess they don't want anything to do with the worms after the show taping is over," Rhyme said.

Family business

Mealworm and cricket farming is a niche business, with maybe 40 or 50 suppliers nationwide, according to Karen Long MacLeod, editor and associate publisher of Pet Age, a Chicago-based magazine on the pet supply industry. "The U.S. markets for mealworms and crickets are relatively mature," she said.

The challenge is finding new markets to tap. Rhyme is now looking for deals in Asia, since recent advances in container technology for mealworms and crickets make long cross-ocean transits more feasible.

Horse farms are another market. "Horses that are fed worms from birth have been found. to have stronger legs and longer careers on the racetrack," he said.

As a kid growing up in Minnesota, Rhyme loved to fish and grew to love the mealworm bait commonly used to fish. By the time he was in his teens, he had a small business selling mealworms to local fishermen.

Rhyme joined the Merchant Marine during World War II and later he wound up in Southern California, working at local aerospace firms. But he also kept up his hobby, supplying mealworms at first to fishing buddies. Business spread through word-of-mouth, and by 1952, Rhyme had enough orders coming in to launch a full-time operation.

Rhyme started supplying local pet and fishing stores with mealworms for resale. After that came zoos and aviaries. In the 1960s and 1970s, he bought out some local competitors, emerging as one of the dominant suppliers in the L.A. region. "We now service 80 percent of the zoos in the nation," he said.

A farm starts by putting a few thousand mealworms in a couple of plastic trays filled with wheat bran or some other grain and carrots, which must be refreshed daily. Within a week the mealworms (actually larvae) transform into black beetles, which each lay thousands of eggs before dying. The eggs turn into larvae and the process starts all over again, multiplying exponentially.

A pound of mealworms (roughly 4,500 medium-sized critters) sells for about $16 wholesale. "When we first started, there were no plastic boxes," he said. "Everything was in wood, which had to be very carefully maintained."

Delaying retirement

Air and ground freight charges are among the company's biggest expenses. ("Sept. 11 really disrupted our business," he said. "We had customers all over the country and we couldn't ship mealworms or crickets anywhere by air.") The other major cost is feed, mostly grains and carrots. The worms and crickets require so much feed that Rhyme had to build two storage silos onsite.

Last year, Rhyme won a contract to provide Petco Animal Supply Inc.'s western region stores with mealworms -- a deal expected to boost revenues this year to $6 million from $5 million in 2002.

Rhyme is less concerned about another looming challenge: turning over his business to the next generation. "My three children don't have anything to do with the business, so when I retire, I'm going to hand the operations over to my managers here," Rhyme said. "They've done a spectacular job, so I'm sure the business will be in good hands."

Not that he plans to call it quits anytime soon.

"I don't want to stop working. I don't like golf, and you can only do so much traveling," he said. "I just love coming to work, six or seven days a week. I love getting up, having breakfast, and going in to work. And what's more, my wife works right here next to me. I wouldn't trade it for anything."

RELATED ARTICLE: PROFILE

Rainbow Mealworms & Crickets

Year Foundad: 1952

Core Business: Supplying mealworms and crickets to pet stores for resale.

Revenues in 2002: $5 million

Revenues in 2003: $6 million (projected)

Employees in 2002: 45

Employees in 2003: 50

Goat To tap into overseas markets and supply mealworms to horse farms.

Driving Force: Demand for high-protein feed for pets, zoo animals and birds.