H&M Gelato Ice Cream Center

The Players – Your Options Opening a Frozen Yogurt Store: Franchise, Licensing, Straight Purchase

June 30th, 2011

The Players

• 3 Options – Franchises, Licensing deals or Straight Purchase with no strings attached.

Franchises:

Legal Disclaimer: This information is not a franchise offering for any of the companies listed below and should not be construed as such. We have gathered this data independently and do not guarantee nor assume liability for incorrect data. We recommend that if anyone is seriously interested in pursuing any of these franchise opportunities, that they review that franchise’s Federal Disclosure Document (FDD) with an attorney and accountant.

The franchise route – Is it the safest bet?  Maybe, but definitely the most expensive.

Who’s out there?

Menchie’s

100% Self Serve Concept

Maybe the cream of the crop. Great floor designs – worth looking at in person to see what they are doing. Great fresh fruit topping bars, great looking candy topping displays.

Total Investment: $340,000-$400,000
Initial Franchise Fee: $40,000

Royalty Fee: Not available (we believe it is around 6%)
Advertising Fee: Not available

Franchise Units

Year	U.S. Franchises	Canadian Franchises	Foreign Franchises	Company Owned
2010	38	0	0	4
2009	12	0	0	3

Red Mango

Primarily Full Serve Concept, moving toward Self Serve Concept

Total Investment: $264,500-$435,000
Initial Franchise Fee: $25,000-$35,000
Royalty Fee: 6%
Advertising Fee: up to 4%
Term of Agreement: 10 years

Franchise Units

Year	U.S. Franchises	Canadian Franchises	Foreign Franchises	Company Owned
2010	65	0	0	1
2009	48	0	0	5
2008	36	0	0	8
2007	8	0	0	1
2006	0	0	0	0

Yogurtland

Self Serve Concept

Total Investment: $350,000-$400,000
Initial Franchise Fee: $35,000
Royalty Fee: 6%
Marketing Fee: up to 2%
Term of Agreement: 10 years

Franchise Units

Year	U.S. Franchises	Canadian Franchises	Foreign Franchises	Company Owned
2010	85	0	5	6
2009	57	0	2	4
2008	25	0	0	3
2007	1	0	0	2
2006	N/A	N/A	N/A	1

Freshberry – Self Serve

Total investment: $165,750 – $386,200
Franchise fee: $25,000
Ongoing royalty fee: 6%
Term of agreement: Term of agreement not renewable

Franchise Units

Year	U.S. Franchises	Canadian Franchises	Foreign Franchises	Company Owned
2010	16	0	11	0
2009	5	0	0	1
2008	0	0	0	1
2007	0	0	0	0

Orange Leaf –

100% Self Serve Concept

A solid player, with a relatively small initial franchise fee.

Total Investment: $210,000-$356,500
Initial Franchise Fee: $12,000
Royalty Fee: Not available
Advertising Fee: Not available

Pinkberry

Arguably the most established successful franchise.

Primarily Full Serve Concept, moving toward Self Serve Concept

Seems to have much more stringent requirements, starting with:

Minimum Liquidity: $400,000 ($200,000 per store)
Minimum Net Worth: $800,000 ($400,000 per store)

Total Investment per store: $300 – $450,000 per store
Initial Franchise Fee: $45,000
Royalty Fee: 6%
Advertising Fee: 2% local +2%Nat’l

Licensing

This is “almost” a franchise deal, but with more flexibility. You basically buy a name brand and the concepts.

Tuttifrutti for example, charges a $25,000 fee and zero ongoing royalties. For this, you get to use their name, the designs, marketing tools, etc. They also help you with machines, layouts, etc.

This is an attractive concept, but you are limited in your territory and have to shell out cash for every store you open. In other words, you pay $25k and they help you get the first store open. If you want to open a second store, that fee might be $20k, then $18k for the 3^rd store and so on.

Like the franchise concept, it is comforting to have a group behind you with the “know-how” to get you started without having to reinvent the wheel.

But don’t be misled. You will need your own architect, contractor, etc. TuttiFrutti will simply help you determine what a good location is, and act as consultants. The key services that architects and contractors provide are out of your pocket in addition to the $25k licensing fee.

In summary, this seems like a pretty good deal, but beware. Make sure you know what kind of pricing you are going to pay for the product mix, etc.

STRAIGHT PURCHASE:

(True Independence) – No money down, no royalties

Going forward as an independent is one of the most attractive choices. After all, how hard can it be? Do you really want to be fully committed to any type of contract that limits your territory, creativity and makes you sign an iron clad contract that seems to protect everyone but you? That sounds harsh, but you really need to watch what you sign when you go any other way than as an independent.

There are suppliers out there who will sell you frozen yogurt liquid mix or powder. The liquid mix is the easiest to deal with. Simply pour the mix into the hopper and that’s it. The machine does the rest.

Dreyer’s/Edy’s, Honey Hill Farms, Yocream and others are out there.

I personally believe that Dreyer’s/Edy’s is  the best choice if you are going to go in this direction.

Why is Dreyer’s/Edy’s frozen yogurt mix a great choice?

1) Zero fees

2) Dreyer’s/Edy’s offers marketing materials that are beyond what others will provide. This option gives you the best chance to replicate what the franchises are doing.

3) You can buy the mix and choose to use the Dreyer’s or Edy’s name or choose to create your own brand and call it whatever you want with no strings attached.

4) National distribution is also key. If you don’t have easy acess to the product you choose to go with, count on paying more to ship it to your location in large quantities. This makes it harder to manage inventories, ordering, etc. Dreyer’s/Edy’s has a various distribution alternatives across all markets nationwide. And the pricing is aggressive in comparison to others we’ve seen.

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