Frozen yogurt, franchising a fad

Drivers along Rogers Avenue see it. Visitors to Pinnacle Hills see it, too. Self-serve frozen yogurt shops have started to dot the landscape, with dozens of stores opening from Bentonville to Fort Smith and across the entire state.

But according to Mark Goodson, the owner of Goody's Frozen Yogurt in Fort Smith and Van Buren, the craze may have plateaued.

"I don't think that it's going to decline, but I don't think that we'll continue to see the increase," Goodson said of the rise in frozen yogurt shops.

With his business in particular, Goodson said the appeal of a new business has started to wane since the Fort Smith location opened in March 2011.

"I think when we first started, the fad and the newness of it, because we didn't have that before, as with everything in Fort Smith, we had some really, really great months and then it tapers off."

Brian Mooney, director of eastern U.S. operations at TCBY, which has six stores in Arkansas, including one each in Rogers and Fayetteville, said he sees the yogurt industry being very much like the coffee industry, where there was a rise in the number of coffee-related businesses saturating the market until it was finally too much and businesses started to close, in many cases leaving Starbucks as the last man standing in several communities.

"I feel confident that we'll be standing many years from now. I see a similar path to what happened with coffee," said Mooney, whose territory runs from Arkansas to Minnesota and east to the Atlantic coast.

The rise of the frozen yogurt craze, according to Mooney, was largely driven by two factors involving consumers – the self-serve model and the appeal of a healthier snack choice, which he said consumers find with frozen yogurt, that in many cases are 98% fat free.

"There is a generation of 'my way.' There are many ways to cater to individual needs. It follows that philosophy of having it your way."

OPERATION COSTS
Mooney explained that during the meteoric rise of the self-serve frozen yogurt business, many chains and independent shops opened because it was viewed as an easy type of eatery to open, with little overhead as compared to other restaurant establishments.

Goodson likened the opening of self-serve yogurt shops to the opening of Subway restaurant franchises, which have also seen a rise in locations during the last decade.

"You don't have to be an owner-operator to have a Subway store," he said, though he added that he runs his two stores on the owner-operator model. "We've never had anything that we weren't in and out of everyday. But for people who are out there putting in lots of stores, I mean it's just like any other franchise. They find them a manager and a couple of helpers and away they go."

The investments, he said, are about the same "from spot A to spot B."

And that investment is relatively small compared to opening a fast food restaurant, Mooney said, adding that it only costs a franchisee about $35,000 to become a TCBY franchise and the total cost of building a new store typically runs about $325,000, while WorldFranchising.com estimates the total investment in a new McDonald's franchise being between $1.1 million to $2.1 million.

The overall costs for overhead run relatively cheap, as well, with many yogurt stores only having to carry a limited amount of food offerings (yogurt, toppings, etc.), Mooney said, versus the wide variety of options offered at a fast food restaurant, meaning large industrial freezers and large quantities of food are required to be stored and prepared for small margins.

Not only do the stores have low overhead when it comes to food and supplies, but they also have low cost when it comes to staff, according to Goodson, who used to own other restaurants in the Fort Smith area over the last several decades.

"As times changed, we kind of figured we wanted something with less employees, and …self-serve frozen yogurt sort of lends itself to having less employees."

Goodson said his store has a total of six employees, whereas WorldFranchising.com estimates that the average number of part-time employees at a McDonald's restaurant totals about 50 people.

"Most of the time (it's one person working). The weekends we have two, Friday nights we have two. Saturdays and Sundays there's two here most of the time."

The smaller payroll expenses and the reduced food inventories have helped his margins, though Goodson said some individual toppings can occasionally be priced higher than he would be comfortable with.

"I think we have a little better margin than we did at the restaurant, but we have a little higher cost with some of the food, and it changes some because of the seasonal fruits," he said.

GREAT EXPECTATIONS
To continue to grow the business, Goody's has quietly added cupcakes to its lineup. Goodson said adding different items helps keep new business coming in, which he hopes will keep sales climbing higher year over year.

Mooney would not mention any new product lines on the horizon for TCBY, but did say that he sees a bright future for the company.

"When you have a great product and give it a great environment, it's been a great deal of fun for us as a company. It's given us growth. We're adding 60 stores (this year). That's healthy to be growing."

It's not just a a vision he sees for TCBY, but a vision for the industry that even though it may have plateaued, is still strong.

"Going forward, I see yogurt will be very much in demand."