Frozen Yogurt Franchises: Fad or Trend?

Back in the 1980s, frozen yogurt shops took the United States by storm. Suddenly, it seemed like every street corner was home to a shop selling frozen yogurt with a variety of toppings. After dominating the frozen dessert industry for about 10 years, frozen yogurt was slowly overtaken by premium ice cream shops and gourmet coffeehouses.

Fast forward to today, and this frozen treat is hot once more. Companies like Pinkberry, Red Mango, Yogurtland, and FreshBerry are everywhere you look. Restaurants and Institutions magazine named frozen yogurt one of its “Big Menu Ideas for 2009,” and Nation’s Restaurant News named franchisor Red Mango as one of its five “Hot Concepts” for 2009. But is “fro-yo” a fad, or a lasting trend?

“Yogurt will likely be a longer-lasting trend, and I see no reason why the frozen variety should fade out sooner,” says Bret Thorn, food editor for Nation’s Restaurant News. “NPD reports a steady increase in interest in probiotics—the reportedly healthful bacteria in yogurt and elsewhere—over the past couple of years.”

Big-name frozen yogurt chains’ big growth plans indicate confidence in the future, and they’ve got the funding to carry out their goals. Red Mango recently raised $1.2 million of a round of $8 million it is seeking, and plans to add 550 locations over the next five years. Pinkberry recently raised $9 million in funding; Canadian chain Yogen Fruz recently expanded to the United States; and Yogurtland, which opened in 2006, will soon have nearly 80 U.S. locations.

While the fro-yo concept may be saturated in New York and Los Angeles, there is still plenty of opportunity elsewhere. “Most of the country remains innocent of the newer, tarter wave of frozen yogurt,” says Thorn. “Foodservice company Sodexo signed a 10-year deal with Red Mango to open units in a variety of locations.”

Thorn says that Sweetgreen, a salad and frozen-yogurt chain in Washington, D.C., has also been doing well. The company is about to open its fifth and sixth location. In particular, Thorn says colleges and universities, and communities with health-conscious, trend-focused people, are likely places for frozen yogurt to thrive.

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Financial incentives for frozen yogurt franchises

Compared to other food-service concepts, frozen yogurt is low-investment, with small locations and limited menus. Franchisors are offering financial incentives to make the investment even lower. After a Spoon Me franchisee opens their first store, the frozen yogurt franchisor offers a $5,000 discount for each additional store.

In 2009, Red Mango’s Red’s Real Deal program provided a $10,000 discount off the franchise fee and an additional $10,000 for local store marketing to franchisees who signed new franchise agreements by October 1, 2009. But Red Mango is now taking a different approach, says vice president of franchising James Franks. Asked about future incentive programs, he says, “We strongly believe Red Mango is a deal in a transparent and true way that is supported by our FDD. Our growth continues to defy the economy in support of our mission to provide a great franchise opportunity at face value.”

The proof may be in the yogurt—last year Red Mango also had a program to buy back a new franchisee’s store for up to $275,000 if the franchisee wasn’t satisfied within the first six months of opening. Franks says that 41 agreements were signed, for a total of 209 stores, yet not one franchisee executed this option.

Looking toward the future

Frozen yogurt franchisors are taking steps to position their companies for the long haul. The health benefits of yogurt, plus the store design (typically a “hip,” minimalist environment), are important parts of the equation. “Red Mango offers health, taste and style, which are three key ingredients for a lasting business,” says Franks. “[It’s] all-natural, gluten-free, fat-free and certified by the National Yogurt Association’s Live and Active Culture seal program. The stores focus on style, comfort, design and music, which gives guests a social experience.” Red Mango is also expanding its offerings; it launched the first probiotic ice teas to be sold at retail and recently added smoothies and parfaits to its menu.

At Spoon Me, chief executive officer Brad Whitaker is positive about the future. “We have an exciting new marketing calendar this year, starting with our first initiative ‘Spoon Me in the Tropics,’ followed by ‘Summer Harvest,’ and so forth.” He adds that franchisees receive firm support when it comes to marketing and have access to tools like graphic collateral, flavors tested by the franchisor, and a bevy of smoothies to offer.

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