When you stroll through many of the nation's malls and shopping strips lately, you see one shuttered store after another. And then there's the fro-yo shops.
In Southern California and in pockets across the U.S., frozen yogurt shops are popping up like crazy this year — especially pump-it-yourself shops, primed to rival the new “full-service” stars Pinkberry and Red Mango. Two self-serve frozen-yogurt chains are emerging — each opening new stores at a rapid pace — alongside an increasing number of mom-and-pop (or just dude-and-dude) establishments.
All told, it’s a lot of fro-yo. According to the Los Angeles Business Journal, there were already 250 individual shops in L.A. County by early in 2009.
Overall, the frozen dessert industry has grown by 16 percent since 2003, according to research firm Market-Research.com, to become a $12.1 billion business — and much of that growth has been from frozen yogurt.
“The frozen yogurt sector is definitely growing,” said Edith Wiseman, VP of Client Solutions an Arlington, Va.-based franchise research firm FRANdata. "It's an affordable, perceived healthy treat."
The frozen-yogurt business has been in the midst of a makeover since 2005, when Pinkberry opened its first sleek shop in Los Angeles, offering a distinctly tart-tasting (and many would say more authentic) version of frozen yogurt with a wide variety of toppings. South Korea-based Red Mango followed into the U.S. market, also offering tart fro-yos with similar toppings.
Their products also potentially cause wallet freeze. At both chains a single serving of flavored yogurt with a couple of toppings starts at about $5, and can easily go up to $7 or $8.
Enter the self-serve rebels, including the emerging chains such as Yogurtland and Menchie's. At these stores, not only do customers get to pump their own — controlling the quantity, mixing flavors, adding any combination of toppings (sugar-y cereals like Fruity Pebbles have become de rigueur) — but they also are charged by weight.
Typically, charges range anywhere from 30 to 50 cents an ounce, which brings a cup-sized serving to about $3, unless you get carried away.
Frances Lam, a mother of two in San Diego, uses the self-serve shops to keep her toddlers' treats small.
"I like it because I can just get a little bit for my son for about $1 and not pay the regular ice-cream-cone costs of $3," she said. "We also love the toppings. My favorites are brownie pieces and miniature gummy bears."
As a start-up, the self-serve shop's business model looks pretty tempting, too. While the International Franchising Association recently reported that the overall number of franchise establishments will likely dip by 10,000 in 2009, the organization predicts that the frozen dessert sector will likely still grow, even if it’s just by a few percentage points — these days, a big victory in itself.
Another good indicator for the latest fro-yo craze: The companies that supply these stores are doing a rollicking business. YoCream International, for instance, a major supplier of custom-made and pre-made frozen yogurts, saw its 2008 sales go up by 52 percent. The first half of fiscal year 2009 has seen a 70-percent boost compared to last year, with a big surge in sales to single-unit stores.
A frozen-dessert franchise costs, on average, a little under $400,000 to open, according to FRANdata. That's a bargain compared to a sit-down restaurant (over $900,000), but still twice as much as opening a party-supplies store ($200,000). Most companies use pre-made mixes, though some customize those mixes. Once a store is operating, it doesn't need much staff — someone to weigh the yogurt and ring it up, basically, and perhaps someone to keep an eye on the machines and inventory.
The idea of fewer staffers actually appeals to customers such as Caroline Curson, who has seen a sudden proliferation of frozen yogurt shops near her college campus, and particularly likes the self-serve shops.
"I think it's a great idea," said the UCLA junior, "since you can put exactly what you want in your own cup. You can try all the flavors or just one, and put the amount of topping you want, instead of having the man behind the counter guessing. I think it is a win-win situation for the customer and the yogurt company, because the customer gets what they want, and the company does barely any work.”
Curson says she tries something new every time, though she is underwhelmed by the tart flavors.
"I'm more of a chocolate girl," she said.
"From the business model viewpoint, in terms of labor, it is a little easier than some others," acknowledged Alexis Eldridge, marketing consultant for Yogurtland, which has 50 stores and hopes to open at least 20 more by the end of the year. “But I hesitate to say that it’s simple. Getting the best quality product is critical.”
Still, not everyone is bullish on the self-serve concept.
“When a store is totally self-serve, it takes away one component of the going-out experience,” said FRANdata’s Wiseman. “The consumers like to customize, but they also go out because they want to be served.”
Plus, the do-it-yourself shop can create some cleanliness issues.
"Whenever you have large crowds of people free to do what they want, it can become a mess,” said Wiseman. “Self-serve is a compelling business model, but it has its challenges."
Amit Kleinberger, the CEO of self-serve chain Menchie's, says his company has received an "A" for all of its inspections thus far. Menchie's currently has 14 stores and is looking to open nearly 20 more by the end of 2009, putting it in 13 states.
Meanwhile, Kleinberger welcomes the intensifying competition.
"The frozen yogurt business is kind of like basketball — it's a great sport, and so everyone wants to compete," he said.
FRANdata’s Wiseman warns, however, that this game, like any quickly-growing business, will leave out plenty of start-ups.
"There can be some winners in the self-serve market," said Wiseman. "But there's only going to be one or two."
Jason Wilson certainly wants to compete. The 23-year-old and his business partner opened self-serve shop Desserted Island a few weeks ago on Highway 101 in Solana Beach, north of San Diego. Before this, Wilson had worked a few years in food service, and his buddy had managed a yogurt shop. They're banking on their prime location-steps from the beach and next door to a popular pizza-and-beer joint-to bring in the yogurt lovers. He admits they're learning as they go.
"Suddenly we'd realize, hey, we need to go buy a whisk," he said, "or we need more A/C—the chocolate chips were melting."
His shop offer 40 toppings, and opted for what they consider the "premium" pre-made yogurt mix, YoCream, which costs more. To compensate he is charging 39 cents an ounce.
"It (YoCream) just tastes so much better," he said.
Wilson and his partner are hoping to build word-of-mouth by distributing fliers at beach events and doing promotions at local schools. But like a lot of his fro-yo competitors, Wilson also seems to have plenty of optimism about the concept.
“Frozen yogurt is great,” he said. “It’s not all fatty like ice cream, and here you can serve yourself, so the customers get exactly what they want. You can’t go wrong with that.”
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