Frozen Yogurt Franchises Are Freezing Over America
There’s a hot new trend in town. Actually, for the purposes of this article, we’ll have to call the trend cool – or better yet, frozen.
Whether it is due to the fact that they provide healthier, probiotic filled options to traditional ice cream parlors or because of their environmentally friendly practices, frozen yogurt franchise opportunities are freezing over America and showing no signs of a slowdown. From coast to coast, Americans no longer care about taste and taste alone, but the nutritional content of their food as well. Now, the creators of frozen, creamy, delicious-yet-healthy frozen yogurt desserts are sprouting up across the country at an alarming rate.
There is an unusually large number of distinct frozen yogurt franchises for sale given the purportedly niche market they serve (though the trend is going more and more mainstream everyday). So what differentiates all of these fro-yo joints? Well, surely you can decide whether you are in the mood for Yogurtland, Yogurtini, or YoBlendz. And of course Kiwiberry, which has much different offerings than Freshberry, is never to be confused with Pinkberry. Or did I mean to say Berri Good?
Yes, all of the aforementioned stores offer frozen yogurt. And most of the products they offer are kosher, fat-and gluten-free, all-natural, and filled with probiotics found in “regular” yogurt that support immune health. Speaking of Pinkberry: Where does the equally colorful, both in name and storefront, Red Mango get off throwing around allegations of copycatism?
But joking aside, the frozen yogurt sector has grown into a force to be reckoned with. There are already cults of fro-yo fanatics who swear by just one of these stores and pledge an allegiance to never cross over to any of the others. And as far as which brand is the father of fro-yo, responsible for starting this craze of frozen yogurt that isn’t made to taste like ice cream, but yogurt that has been frozen: The topic is actually the driving force behind one of the country’s great rivalries. Not Red Sox v. Yankees, but Red Mango v. Pinkberry. But for now, we will not be playing lawyer, discussing the details of when and where the first of these franchise opportunities was really founded. Rather, we are here to teach about, if not celebrate, this incredible new craze for delicious and all-natural frozen treats and compare both longstanding and upstart opportunities in this sector of the franchising world.
The originators Regardless of who really did it first, these are the first-generation fro-yo joints:
Yogen Fruz [over 985 locations]
In 1986, two brothers -- Aaron and Michael Serruya, at the time ages 18 and 20, respectively -- opened a revolutionary fro-yo concept in Toronto, Canada. Yes, 1986, as in a decade before many of these other frozen yogurt chains opened. According to our frozen yogurt industry report, the first wave of frozen yogurt fandom was actually in the 1980s. The idea behind the Yogen Fruz franchise, its website says, was to develop "a health experience unlike any [customers] had tasted before." It was this very philosophy that was the backbone of the frozen yogurt company that, by the mid-90s, was ranked the top frozen yogurt franchise by EntrepreneurMagazine. By 1999, Entrepreneur Magazine ranked Yogen Fruz the number one Franchise in the World among the Franchise 500!
Yogen Fruz has a special blending process that captures the natural sugars of the fresh fruit that customers choose to include themselves. Indeed, the Yogen Fruz franchise proclaims that it offers "the most unique tasting product in the better-for-you frozen desserts industry." The stores offer yogurt with toppings, blended fruit and yogurt, smoothies, parfaits, and fruit cups. The freshness of Yogen Fruz's ingredients is perhaps only outdone by the lyrics to "Yogen Fruz," the auto-tuned hit single, which can be found on top of the Yogen Fruz website. "I gotta get some Yogen Fruz. Everywhere I go, it calls me. It's so tasty, yummy yummy!"
The nitty-gritty: The minimum net worth for a franchisee is $350,000, with $100,000 liquid. The estimated total investment is between $150,000 and $280,000, including a franchise fee of $25,000. The average amount of royalties paid to the franchisor is six percent of gross monthly sales.
Red Mango [over 135 locations]
Mango: a distinct, nutritious, and delicious fruit. Red: its optimal stage of ripeness. That is where one of the first frozen yogurt chains drew inspiration for its name. The Red Mango franchise describes its leadership team as being a “passionate team of health-conscious” people with extensive business experience. These higher ups boast providing a product that, as the name would imply, is both delicious and nutritious and can be enjoyed at any time of day. Red Mango offers parfaits (for which organic, omega-3 rich granola is used), smoothies, “Hot Chocolate Chillers,” and other iced beverages such as Mango Passion green tea.
The store claims to stay away from high fructose corn syrup, artificial ingredients, calories from fat and sugar, generic “unproven” probiotics, and modified food starch, unlike its competitors. In relation to Red Mango’s frozen yogurt, the Max Muscle franchise's Max Sports & Nutrition magazine even weighs in, saying, “[It’s] a guilt free-frozen treat that won’t have a negative effect on your waistline."
The nitty-gritty:Red Mango has been franchising since 2007, and in business since 2002. The franchisor charges an average royalty fee of six percent and an advertising fee of four percent of gross revenues. The estimated total investment is $240,000 to $430,000 depending on region, size, etc. The franchise fee is $35,000 for the first store and $30,000 for each store thereafter. Franchisees must have $350,000 net worth and $200,000 in liquid assets.
Pinkberry [over 125 locations]
Pinkberry actually has a “Groupies” section on its website where fans can sign up for an e-mail newsletter to stay up to date on the latest Pinkberry happenings, qualify for special rewards, and participate in its Groupie Panel to discuss all things Pinkberry. Talk about customer loyalty! Those who claim to enjoy Pinkberry more than many of its competitors’ frozen yogurt may be paying homage to the “signature tang” in the company’s yogurt.
The Pinkberry franchise recently expanded its menus to include parfaits and green tea smoothies. In addition to these new items, Pinkberry stores offer frozen yogurt in a cone, shakes and fruit bowls. As far as toppings, the store offers ten never canned or frozen fruits, twenty dry toppings and three liquid toppings. It's fruit toppings are cut fresh daily, making for the healthiest possible customer experience. Speaking of health, Pinkberry yogurt has over ten million live and active cultures, or probiotics, per gram.
The nitty-gritty:The Los Angeles, California based store has been franchising since 2006 and is looking to expand both in the U.S. and internationally. Perhaps this is a testament to the quality of management of the franchise, but Pinkberry is only looking to add franchisees who have multi-unit management experience or proven executive leadership skills. The initial license fee is $45,000 and royalty fee is six percent of gross sales. The national marketing fee is two percent of gross sales, while local advertising requires two percent of gross sales. Franchisees must have a minimum net worth of $800,000 and minimum liquidity of $400,000.
The up-and-comers Think of these concepts as the heirs to the fro-yo throne. Although they superficially resemble the originators, these brands bring some new and (even more) refreshing ideas to this growing field:
Yogurtland [over 135 locations]
William Chang had worked in retail for twenty years before the idea for a new fro-yo store dawned on him. Chang’s idea would come to fruition in 2006, when the president and CEO founded the Yogurtland franchise. Now, Yogurtland is offering its customers a self-serve, charge by-the-ounce model to enjoy.
Consumers can't help but feel an overwhelming sense of happiness as they gaze down the seemingly never ending hallway of soft-yogurt dispensers. Scott Shoemaker, Director of Product Development at Yogurtland, described what goes through customers' minds as they walk through the doors: "We are cognizant of the fact that when customers come to a place like ours, it's an emotional experience. Flavor is about the emotional response. Here, we target our flavors to meet the expectations of our customers."
Yogurt is the store’s specialty, so yogurt is what it sells. At this point in time, unlike some of its competitors, Yogurtland has stayed loyal to its frozen core: the concept doesn't offer alternatives like gelato or smoothies. However, a nice additional touch is that the chain offers complimentary water that is flavored by fresh strawberry slices to give it a light, sweet taste, to keep customers refreshed (and coming back!) in the hot summer months.
The nitty-gritty:As far as franchising goes, Yogurtland has a $35,000 initial franchise fee and an estimated build-up cost of about $375,000 depending on size and location. Additional fees include six percent royalty fees and two percent of gross monthly sales for the national advertising budget. They have been franchising since 2007. The minimum net worth required to buy a Yogurtland franchise is $800,000, while minimum liquidity is $200,000.
YoBlendz [7 locations]
To start, this chain differs in that, whenever possible, it ends words with a “z” (see: “freshest fruitz” and “sweetest sweetz”). But its differences, as you would hope, do go deeper than that! The YoBlendz franchise claims to offer a state-of-the-art dining environment and a wide array of toppings for consumers to decorate their fresh frozen yogurts with. Also, unlike many of the others, YoBlendz offers low-fat, in addition to fat-free, options to tickle your taste buds. Some of the more interesting and creative flavors in the low-fat category are eggnog and pumpkin pie. There are also more traditional choices such as cookies-n-cream and triple chocolate. The store offers some interesting options in addition to yogurt, such as tart, gelato, custard and sorbet.
Details for franchisees:The franchise fee is $40,000, while the total investment ranges from $109,500 to $448,000. YoBlendz has been franchising since 2010. The average royalty fee is eight percent of gross monthly profits. Minimum net worth required to buy a franchise is $375,000, while the minimum amount of liquidity required is $100,000.
16 Handles [16 locations]
16 Handles has sixteen flavors and over forty toppings for its customers to enjoy. Aside from the flavor of its yogurt, this company's unique environmentally friendly practices are what sets it apart from other fro-yo franchises. The 16 Handles franchise uses cornstarch spoons and biodegradable cups in all of its locations, and it composts and recycles whenever possible. It is also an avid participant in Trees for the Future. Every one of its locations helps plant sixteen trees every day!
The nitty-gritty:Typical start-up cost for a 16 Handles franchise is $350,000 - $500,000. Royalties are six percent of gross sales, while the marketing and brand development fee is two percent of gross sales. Minimum total net worth is $500,000 for a franchisee, and minimum liquidity is $300,000. The standard store size is between 1200-1500 sq. ft. with additional 200 sq. ft. for storage. All necessary product and material support is provided through the 16 Handles distribution network.
Menchie’s [over 90 locations]
The Menchie’s franchise positions itself as a unique fro-yo place because it allows its customers to pay only for what they want. Unlike many of the other stores on this list, Menchie’s customers pay for their yogurt per ounce.
The franchise, which has a selection of over 100 unique flavors and over sixty unique toppings, is expanding rapidly. The toppings and flavors vary on a rotating basis, as does its celebrity customer base. Miley Cyrus, Taylor Swift and Justin Timberlake have all been seen enjoying a Menchie’s dessert. At this point in time, there are 35 Menchie’s locations across eleven states, and the store has plans to add an additional 85 locations by the year’s end. In 2010 Menchie’s experienced 748 percent growth in sales and made it to Restaurant Business Magazine’s ‘Future 50’ list.
The nitty-gritty: Menchies has been franchising since 2008. The average royalty fee is six percent. Estimated total investment ranges from $240,000 to $575,000, including the initial franchise fee of $40,000.
America is riper than a soft red mango for more (and more) fro-yo storefronts to help satiate its cravings for healthier and lighter cold desserts. With aggressive marketing schemes and a consistently delicious product, there may in fact be enough room in the world of fro-yo for many different franchises to coexist. It is an exciting time for both consumers and franchisors as the frozen yogurt market continues to grow and expand into every last corner in the country, continuing its run as one of the most talked-about consumer food categories in years.
Drew Wolin is an analyst at FranchiseHelp.com. Contact him at firstname.lastname@example.org.
Franchise Law For Beginners (Part I)
Both franchisors and franchisees have ample reason to question whether the legal system exists to serve franchising, or if it’s the other way around.
Strategic and Structural Alternatives to Franchising
These are difficult decisions. The solutions are not clear cut from a business or from a legal perspective. It is critical that a company in this position work with qualified counsel to identify an alternative that will have a reasonable basis for an exemption and still make sense from a strategic perspective. The balance of this chapter will look at the many alternatives currently being tested by many U.S. and oversees companies. As you can see, the lines of demarcation are not always clear. The differences between many of these alternatives may in fact be in name only. Some of these concepts are truly innovative and have not been truly tested by the courts or the regulators. In these borderline cases, a regulatory “no-action” letter procedure is strongly recommended. Other concepts are not very innovative at all and merely borrow from long-recognized and analogous legal relationships such as chapter affiliation agreements in the non-profit arena or network affiliation agreements in radio and television broadcasting.
What is Subfranchising?
Like the franchisor, the subfranchisor signs a subfranchising agreement with the franchisees (when a franchise is sold) in the area. Technically, the subfranchisor takes over the role of the franchisor in certain geographic regions.