Business Looks Rosy for Frozen Favorite Pinkberry

People often tout location as a major determinant of a business's success. So when first opened in 2005, in a space that was once a two-car garage hidden away in a residential neighborhood in Los Angeles, it seemed that, if anything, the frozen yogurt shop’s poor location would soon lead to its demise. But not only did Pinkberry draw crowds to its obscure site, it reenergized the frozen yogurt category.

Now, only six years later, Pinkberry has become a global brand with a presence that can't be denied. We recently spoke with company CEO Ron Graves, who gave us the inside scoop about the substance behind the Pinkberry brand: how the brand has gone global yet is powered by a staff of just 40, how the company is growing quickly yet also knows when to slow down, and what’s next for this popular frozen yogurt franchise.

AllBusiness.com: How has Pinkberry been affected by the recession?

Ron Graves: Of course we’re affected by [the recession]. From our perspective, though, that just means that we need to be very in tune with our customers, know what’s important to them, and make sure that we’re providing value. People are still spending money, but they want to make sure they’re getting value. And we’re all about quality -- quality of our product, quality of our real estate, and quality of our people. We invest in people and service, we invest in quality of real estate, and we invest in the quality of our product. That’s not going to change regardless of what’s going on in the economy. This year we’ll build 60 stores -- half will be domestic and half will be international. I credit that growth to the quality of our team and the quality of our [franchisee] partners.

AllBusiness: Tell me more about your franchisees.

Graves: We have a very high bar for who we partner with. First, we’re looking to partner with area developers who have relevant multi-unit operating experience. Secondly, [franchisees] have to be local. We want people who are tied to their community, have connections, and want to give back. Third, [franchisees] need the capital to develop a market and get it off the ground without relying on bank loans. Most importantly, we look for people with like-minded values. The culture at Pinkberry revolves around the employee experience, the customer experience, and the brand. We need to feel a common set of values with our partners. That takes time, so we spend a lot of time with people. We’ve had probably over 6,000 requests this year from people wanting to be Pinkberry franchisees, and we’ve made very few deals. There’s a lot of demand, but the bar is very high.

AllBusiness: Has the economy made it harder to find people to match those four criteria?

Graves: I think our standards are very, very high, and that’s probably a bigger bar than the economy right now. [The economy] hasn’t really limited our growth. We’re growing very rapidly, and we’re growing globally. We also are adamant about not compromising on the quality of the experience, and we have the right people internally and the right [franchisees] to do that. The thing that I’m most gratified by at Pinkberry is when I get customer feedback that talks about how great our people are regardless of where a store is located – anywhere in the country or in the world. And that doesn’t just happen. That takes a lot of work and dedication. It’s all about our people. It’s all about corporate, our selection process, and how we train them. It’s essential to have the right [franchisee] partners.

AllBusiness: You have only 40 people on staff. Could you talk about why you’ve chosen to keep the staff so lean?

Graves: We’re a startup. We’ve got to be responsible and run as lean as we can. But we also have a responsibility to provide important services to our stores globally. The way I’ve always dealt with this is hiring ahead of the curve, and hiring people who are very capable and qualified to meet the growth ahead.

AllBusiness: Some have criticized you for taking a long time to build your management team. Do you think that the time you spent to build your team was valuable time lost considering the amount of competition in the industry?

Graves: I would say we’re constantly building our team, evolving, and adding new talent as we grow. The single most important thing that a fast-growing company can do is to hire the right people who are ahead of the curve. Any company can grow fast, but without consistency and quality. It can also grow too slowly and not take advantage of opportunities ahead. There’s a constant tension between growing too fast and too slowly. What you need to do is build the right infrastructure and the right foundation that’s made up of the right people, the right processes, and the right strategy. That’s why we’re able to grow globally right now -- we’ve taken the time to find the right people internally and the right franchisees. Companies that don’t do that, I think, aren’t built on solid footing.

AllBusiness: Could you talk a bit about the cult-like following that Pinkberry created and how you’ve been able to keep that?

Graves: Pinkberry was born of innovation so there was nothing else like it. People really worshipped the product and the quality of the store experience. But when you’re the original, you have a responsibility to stay innovative and constantly focus on doing things that surprise and delight the customers to maintain that following. [When we] go into a city, even if there are many competitors that have come in before us, it’s really gratifying to see the response. People know Pinkberry. They’ve been to one or they’ve heard of it, talked about it, or read about it online. There’s really a demand to keep Pinkberry growing, but we can’t rest on that. We’ve got to constantly innovate, constantly elevate, improve, and do whatever we can to make Pinkberry better.

AllBusiness: How has Pinkberry dealt with the stiff competition in the frozen yogurt industry?

Graves: Pinkberry basically reignited the entire category in 2005. There was really nothing else like it when Pinkberry launched. Anytime you have a big market and a company has tremendous success, you get a lot of competitors. That’s OK. That’s the price of leadership in a category. It means you're probably going after a decent market, but it also keeps you on your toes. However, we’re focused more on our customer and on constantly improving our customer experience than we are on the competition. We’re aware of [the competition], we monitor it, we try to glean things from it, but we’re much more focused on our customers.

AllBusiness: Did the fact that so many new competitors sprang up after Pinkberry reignited the category change your plan for growth or make you feel like you had to enter new markets faster?

Graves: No, not at all. Our growth is limited only by the quality of the [franchisees] we select and by our ability as a management team to support them.

AllBusiness: Could you talk about what’s next for Pinkberry?

Graves: Today we have 138 stores, we’re in 15 states, and we’ll end the year in 19 states and 14 countries. But it’s not really about the number of stores, the number of states, or the number of countries. It’s about making sure that every store that opens meets and exceeds customer expectations.

AllBusiness: Please talk about Pinkberry’s international expansion.

Graves: Our first international store was Kuwait. [At that time,] we were only in three U.S. cities and a lot of people thought I was crazy. But I have to tell you it was a fantastic partner, and it was a great, great decision for Pinkberry. [International expansion] takes time -- there’s lead time. When we opened our first international store in 2009, we were working with that partner for well over a year before that first store opened. We also were working with other partners. For a lot of the partnerships that were formed [then], it’s only now that the stores are opening. Now we have stores in the Middle East, Russia, London, and Turkey, and we’ll be opening in Asia.

AllBusiness: Is where you choose to expand determined by where you find the right franchisee partners?

Graves: That’s a primary and probably the most important factor.

AllBusiness: As a franchisor, what questions do you have to consider when deciding to expand internationally?

Graves: We decided to build the brand globally sooner than most companies traditionally would have thought of doing, but we knew that the brand had international potential. People were talking about Pinkberry all over the world. The world has gotten smaller, and companies need to be thinking globally earlier than they may have in the past.

AllBusiness: Pinkberry has received funding from outside investors including Maveron and Highland Capital Partners. How have you been able to get so much support from outside investors?

Graves: Pinkberry is a special brand and a rare brand that has really established an emotional connection with its customer base. A brand like this doesn’t come around all that often. People back people, and we have an amazing team. So I think the combination of a brand that was born out of innovation, and a team that was built ahead of the curve to help grow and take Pinkberry globally, was attractive.

Graves: One is knowing who we are. It’s also being consistent, authentic, and focused on staying true to the brand and not compromising or not letting the competition define who we are. It’s about knowing our customer and looking for ways to build that relationship and raise the bar.