Frozen Yogurt Store Business Insights

Jul 3, 2024

Frozen Yogurt Store Business Insights

Key Financial Insights

  • Average revenue: $750,000 - $800,000/year
  • Daily sales: $2,000+/day
  • Daily owner pay: $328/day
  • Annual owner take-home pay: $93,000
  • Margins: 10-15%
  • Franchise fees: ~6% of top line

Challenges in Running a Frozen Yogurt Store

  • Perishable items (e.g., strawberries going bad)
  • Equipment maintenance
  • Retail leases in prime locations
  • Franchise fees eating into profits
  • Bulk purchasing pros and cons

Tips for Lowering Startup Costs

  • Use business foreclosure sites (e.g., rasmus.com)
  • Buy equipment from failed stores
  • Example: Gym equipment for $13,000 from a foreclosure
  • Example: Complete frozen yogurt store setup for $20,000

Business Model & Market Insights

  • Highly commoditized marketplace (e.g., Menchie’s, Yogurtland, Golden Spoon, Pinkberry)
  • Typical cup size: 8 ounces
  • Typical customer purchase: 500 cups/day
  • Cup content ratio: 75% yogurt, 25% toppings
  • Pricing and profitability:
    • Toppings: 10-40 cents/ounce, charges: 25-60 cents/ounce
    • Yogurt: 8 cents/ounce, charges: 50-60 cents/ounce

Psychological and Operational Strategies

Pricing by Weight

  • Allow customers to control spending, reducing perceived expense
  • Larger cup sizes increase sales
  • “Default option” strategy: eliminating small size, pushing medium and large

Store Layout

  • Order of items: yogurt (high margin) first, followed by dry items, then fresh fruit
  • Aim: fill cup with high-margin items first

Customer Service and Experience

  • Importance of clean stores and friendly service
  • Example of poor experiences: dirty stores, inattentive staff

Marketing and Customer Acquisition

  • Focus on word-of-mouth and referrals
  • Incentives and promotions for bulk customer bases (e.g., universities)
  • Collect customer information (e.g., text lists) for ongoing marketing

Lessons for Entrepreneurs

  1. Usage-Based Pricing: Allow customers to pick their own pricing by usage.
  2. Profit-First Layout: Position high-margin items first to capture most spending power.
  3. Variety Encourages Spending: Offer multiple options to increase overall consumption.
  4. Buy Equipment Cheaply: Look for cheaper equipment from failed businesses.
  5. Default Options: Use larger default options to subtly increase sales.
  6. Low-Cost Marketing: Use word-of-mouth and targeted, bulk-group promotions to attract customers.