Prutha Patel, a 21-year-old Boston University graduate who oversees marketing for the five Orange Leaf stores her family owns in Rhode Island and Massachusetts, says froyo is growing because of its versatility: A customer can go into the store and choose a healthy option by topping it with fruit, or a decadent one by loading it up with candy and chocolate sauce. “I see people coming in two or three times a week,” Patel says. “It’s not seen as this kind of fattening dessert — it can be as unhealthy or as healthy as you like.”
Broader economic trends are driving froyo forward, too. Most of the people at the TCBY franchising pitch appear to be in their 40s and 50s. Some are established entrepreneurs, but at least a few are laid-off corporate types in search of their next opportunity. That’s fairly typical. Buying a franchise “is almost like buying a job,” says Chris Tripoli, president of A’la Carte Foodservice Consulting Group in Houston, so it makes sense that baby boomers who’ve suffered through a recession might look toward franchising in larger than usual numbers. One expert compares it to the way applications to law schools and MBA programs go up during recessions: It’s not that more people necessarily want to go to grad school, but that grad school becomes more appealing as other options dwindle.
The recession has also driven down real estate costs, a key expense for retailers. While locations on froyo-dense Newbury Street and in Davis Square remain costly, commercial real estate in many suburbs is widely available. “When the rent is cheaper, people play around more [with concepts], so you’ll see different kinds of businesses entering the market,” says Amanda Kludt, editorial director of Eater, a network of blogs covering the food scene in Boston and 21 other US cities. Froyo stores often require only about 1,200 square feet — about half the size of a Qdoba — which reduces costs and increases flexibility.
Inside the store, the microeconomics of yogurt sound compelling. Compared with opening a traditional restaurant franchise, froyo seems simple: There’s no cooking, for one. And TCBY franchisees pay around 4.5 cents per ounce for yogurt, which they can resell at 40 to 50 cents per ounce. “That’s a high-margin product, and it’s what allows our yogurt stores to be highly profitable,” says Brooks Speirs, the main TCBY speaker at Maggiano’s (he’s since moved to Moe’s Southwest Grill). The self-serve concept also drives down labor costs, typically one of the biggest expenses facing food sellers. “At 2 p.m., you can have one person running your business,” Speirs says. “Go into a Subway at 2 p.m. and they have four employees there, whether there are any customers or not.” While the equipment to make frozen yogurt is expensive — machines cost independent shops approximately $12,000 each, and many have five or six of them — the overall capital expenses are lower than many types of businesses.
What about competition? For a time at least, it may hurt these businesses less than you’d think. For franchises, shops in the same region can pool advertising dollars, cooperate on promotions, and work together to buy supplies more cheaply. And many people don’t appreciate the benefits even rivals can gain from locating near one another, says Jonah Berger, an assistant professor of marketing at the Wharton School and the author of Contagious: Why Things Catch On. Consider the Italian restaurants in the North End or the auto dealerships on Route 1 or the beauty salons on Newbury Street. “There are advantages to having people go to one place,” he says.
The more people see froyo stores, the more they’re likely to think about froyo, which could cause the overall segment to grow (and perhaps steal share from other impulse-buy snacks, such as, say, Cinnabons). “The situation reminds me of coffee shops,” says Raphael Thomadsen, an assistant professor of marketing at UCLA. “There has been some fear that Starbucks would crowd out local coffee shops. However, there is some evidence that in some cases the presence of a Starbucks has actually helped the local coffee shops by expanding demand for coffee.”
Yet that phenomenon only lasts up to a point. The counter-service yogurt chain BerryLine opened in Boston back in September 2007, making it perhaps the first shop to herald the second wave of froyo popularity. The only real competitor at the time was an old TCBY in Belmont, and that eventually closed. But BerryLine, a local operation, now faces alternatives at all three of its locations—in Harvard Square, Porter Square, and Fenway—and shuttered a fourth on particularly froyo-dense Newbury Street earlier in 2013. It just never did much more than break-even business, says BerryLine co-owner Matthew Wallace.Continued...