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How to Start a Frozen Yogurt Business

How to Start a Frozen Yogurt Business

Do you want to start a frozen yogurt smoothie shop? If YES, here is a complete guide to starting a frozen yogurt business with NO money and no experience plus a sample frozen yogurt business plan template.

It cannot be argued that most people love frozen yogurt as a healthier substitute or alternative to traditional ice cream cones, whether it’s peanut butter- flavoured and sprinkled with chocolate chips, or a tart lemon flavour dusted with coconut shavings.

Frozen yogurt is a lucrative business you can start today that belongs to the profitable ice cream industry, which generated revenues of $9.6 billion in 2009. There are no federal standards for the manufacture of frozen yogurt; however, nearly half of all states have begun to implement such standards. Between 2003 and 2009, this industry grew by 16 percent.

If you are looking for a very lucrative business to start, you can begin to look at starting a frozen yogurt business. This is because of the numerous benefits that is available to anyone that wants to start this business.  Every day there are more and more people looking at starting this business.

If you want to get in on the rapidly growing industry by opening your own frozen yogurt store, just pay attention and continue reading. There are loads of information that will do you a world of good.

Steps to Starting a Frozen Yogurt Business

1. Understand the Industry

Businesses in this lucrative industry include establishments that primarily prepare or serve frozen yogurt and other frozen yogurt-based items, as well as toppings.

This industry has grown at a rapid rate over the five years to 2016. Driven by consumers’ increasing health consciousness and the emergence of tart-flavoured frozen yogurt, it has been estimated that industry revenue climbed extremely rapidly during the period.

Interesting Statistics About the Industry

In the coming years, health concerns and consumption patterns will continue to drive industry growth through the five years to 2022. However, industry revenue will grow at a slower rate than in the previous five years as the industry flow towards saturation.

The Frozen Yogurt industry has minimal barriers to entry, with low entry costs and no strong licensing requirements. However, industry competition and market awareness can pose as a threat to potential entrants. Prospective entrepreneurs just like yourself planning to enter this industry are not particularly constrained by the capital investment required to open a frozen yogurt store.

But you can lease premises and equipment, furniture and fittings, which lower initial capital costs, outlays and borrowings considerably. Entry can also occur through signing a franchise agreement, where costs are relatively cheaper than other food establishments.

The frozen yogurt industry is quickly approaching its limit. With so many stores launching over the past five years, existing stores have experienced increased competition and growth is expected to slow in the next five years as a result. It has been estimated that the industry will grow at a tempered annual rate of 3.4 percent to reach $2.1 billion in revenue by 2019.

Strong operators will continue to see reasonably good results, yet slower growth than in previous years. Customer demand is still strong and the category has some room to grow, but I sincerely believe it’s all about the best operators – those who bring something special to the experience.

2. Conduct Market Research and Feasibility Studies

  • Demographics and Psychographics

Everybody loves frozen yogurt: men, women, kids of all ages, grandmas and grandpas – you name it! Yogurt is a power-boosting protein and bone-building calcium. People eat yoghurt for its sensational taste and its surprising health benefits. Before you plan and open a frozen yogurt shop, you need to find out if there is a demand or desire for the store in your chosen area.

You need to conduct surveys, either by going door to door yourself or by hiring a research firm. Ask a range of people from all backgrounds, ages and genders in the area how they feel about frozen yogurt. Examine income and employment statistics for the region so that you know whether or not people will be able to afford to spend money on your frozen yogurt.

3. Decide Which Niche to Concentrate On

One of the major decisions you will have to make when starting your frozen yogurt store is to determine type of frozen yogurt business. Your frozen yogurt business may include self-serve or full-service treats. Research your local market to identify market niches to appeal to customers and learn about menu offerings and pricing scales. Niches you can choose from may include.

  • Selling traditional frozen yogurt
  • Frozen yogurt wholesale manufacturer
  • Selling tart frozen yogurt
  • Selling smoothies made from frozen yogurt
  • Selling yogurt parfaits
  • Selling toppings and other yogurt-related food items
  • Open a yoghurt related website
The Level of Competition in the Industry

Americans may be more aware of their diets these days, but they certainly have no less of a sweet tooth. Frozen yogurt, a hybrid between the traditional ice cream dessert and the healthier (and hipper) yogurt based products, is an innovative way for customers to “have their cake, and eat it too.”

Although the popularity of the frozen yogurt franchise industry suffered a decline in the late 1990’s, the category has been making a colossal comeback in the last decade, with a new generation of flavours, toppings, and store settings leading the charge.

The Frozen yogurt shop sales growth was fuelled largely by popular national chains such as Pinkberry, Red Mango and Yogurtland, which since 2005 have quickly increased their U.S. location counts, with future overseas expansion expected in markets including Asia and the Middle East.

The firm also predicted, however, that the number of U.S. frozen yogurt stores — which went from 983 in 2007 to more than 1,200 as of 2011 — would shrink starting in 2017, as the market becomes saturated and smaller players struggle to survive against growing large national franchise companies.

4. Know Your Major Competitors in the Industry

  • 16 Handles
  • Chocolate Shoppe Ice Cream Company
  • Frosty Boy
  • Goji’s
  • Golden Spoon
  • Handel’s Homemade Ice Cream & Yogurt
  • I Can’t Believe It’s Yogurt!
  • Jubili
  • Llaollao
  • Menchie’s Frozen Yogurt
  • Orange Leaf Frozen Yogurt
  • Pinkberry
  • Red Mango
  • Spoon Me Frozen Yogurt
  • Sweet Frog
  • TCBY
  • Tutti-frutti Frozen Yogurt
  • Wakaberry
  • YogenFrüz
  • Yogoberry
  • Yogurtland
  • Yogurt Mountain
  • YoLo Frozen Yogurt
  • Yumilicious
Economic Analysis

It was reported in 2011 that annual U.S. revenue at frozen yogurt industry had reached $1.59 billion. Revenue grew 5.9 percent annually in the five years through 2011 and was expected to rise 2.4 percent annually over the coming five years.

It was also accurately reported that frozen yogurt servings in 2011 reached 128 million, up 11 percent from the prior year. Independent operators and large franchise chains have expanded their presence by introducing new flavours, toppings and self-service formats.

According to the industry publication “Franchise Times,” yogurt businesses require initial investments ranging from $330,000 to nearly $500,000 and averaging around $400,000. Per-store sales volumes can range from $200,000 to more than $1.3 million annually; as of early 2013, for example, they averaged $510,000 for Red Mango and $783,000 for Yogurtland.

With the self-serve element, labor costs at some shops can run lower than 20 percent of sales. It seems that product introductions and expansion strategies of new major players in the frozen yogurt industry are what has driven geographic store distribution.

For example, California is considered the domestic birthplace of tart frozen yogurt as that’s where originator Pinkberry is located. Three of the top four largest frozen yogurt franchises also began in California and expanded throughout the state.

As such, California holds the highest percentage of froyo stores at 33.1 percent and is the single reason why the West region has the highest number of frozen yogurt stores. Following the West, the Mid-Atlantic region boasts the second largest number of establishments, with New York holding 14.1 percent. The health-conscious and urban market there is definitely to thank for the expansion to the East coast.

Meanwhile, the Southeast region’s hot and humid climate has led to it landing the third-largest number of frozen yogurt establishments, with Georgia and Florida leading the way. The smallest share of frozen yogurt stores is in the inland and colder states of the Plains and New England, which represent just 3.6 percent and 2.9 percent of total establishments, respectively.

5. Decide Whether to Buy a Franchise or Start from Scratch

For the sake of this article, pursuing the franchise route is likely a better option at this time. Signing on with a franchise that boasts an established brand with proven systems can help jumpstart a business, especially when there are so many other frozen yogurt shops vying for consumer dollars.

Plus, by becoming a franchisee, you will most likely be assigned an exclusive franchise territory. While competition may still exist against other frozen yogurt stores, having your own territory ensure you won’t be rivaling franchisees of the same brand.

Most costs associated with starting a frozen yogurt shop come in the form of fixtures and fittings, such as frozen yogurt machines (refrigerators and dispensers), display shelving (including carts to store toppings), chairs and tables for customer seating, and point-of-sale systems like cash registers and credit card machines.

6. Know the Possible Threats and Challenges You Will Face

Frozen yogurt serves as excellent alternatives to ice cream, especially to those looking for healthier dessert options. Provide a variety of flavours, toppings and serving options, such as edible cones or paper cups, to satisfy as many customers as possible. But before you start this business, there are barriers which you might encounter and they may include:

  • Choosing a suitable niche
  • Applying for permits
  • Purchasing inventory
  • writing a business plan
  • Industry competition

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

Several factors should be considered when choosing the best form of business structure when starting your frozen yogurt business. The type of business structure you choose can have an impact on multiple aspects of your business, including taxes, liability, and your exit strategy.

In starting your frozen yogurt business, a LLC structure is strongly advised because LLCs are simpler and more flexible. Unlike both types of corporations, LLCs don’t require a board of directors, shareholder meetings and other managerial formalities.

Entrepreneurs can divvy up the profits any way they choose, as opposed to shareholders in corporations, who have to carve them up in proportion to their percentage ownership in the company. One benefit of this is that Entrepreneurs can entice talented employees with a share of the profits, even if those employees didn’t pony up their own equity in the beginning. The LLC structure also gives tax-treatment flexibility.

An LLC’s profits can be taxed as a corporate entity (a C Corporation) or as a “pass through” entity (an S corporation), meaning that the company avoids paying tax on both corporate profits and the owners’ personal income. Most LLCs choose the pass-through option. However, in some cases, LLCs can choose a C Corporation tax structure and save money by funnelling profits back into the business tax-free.

8. Choose a Catchy Business Name

  • Berrylicious
  • Cherry On Top
  • Youg
  • CUPS Yogurt Shop
  • Fricky Yogurt

9. Discuss with an Agent to Know the Best Insurance Policies for You

Opening a Frozen yogurt business is not an inexpensive endeavour, and once you enter the world of serving one of the most favourite comfort foods, you must protect it. Protecting your and your investor’s interests through an Insurance Program is not just necessary, it is vital. All kinds of risks are out there that insurance protect you and your business from financial responsibility. These insurances may include:

  • Worker’s Compensation Insurance
  • Commercial Liability Insurance Coverage
  • Business interruption insurance
  • All Risk Equipment Insurance
  • Commercial Auto Insurance

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

The creation, exploitation and protection of intellectual property (IP) rights are fundamental to the success of most retailers. In the Frozen yogurt industry, intellectual property protection and Trademark are needed to serve as

  • Brand and image rights
  • Protection and registration of designs
  • Enforcement and dispute resolution
  • Anti-counterfeiting and piracy
  • Patents laws
  • Trade mark filing and opposition
  • Brand audits and watching services
  • Securing trademarks and passing off
  • Domain name strategies and disputes
  • Data and database rights
  • Competition law
  • Protection of technology and innovation
  • Advertising and marketing issues

11. Get the Necessary Professional Certification

If you plan to start your own frozen yogurt business or if you are currently majoring in marketing or information systems, you could benefit from earning a few certifications which may include retailing certification. These certifications includes:

  • Customer Service and Sales Certification (CSCS)
  • Advanced Customer Service and Sales Certification (ACSSC)
  • Retail Management Certification (RMC)
  • certified food protection manager (CFPM)
  • Master Baking Certificate Program
  • Retail Business Credential (RBC)

12. Get the Necessary Legal Documents You Need to Operate

Knowing what licenses and permits your frozen yogurt business needs can be very confusing when planning a new business. Each item requires time, energy and paperwork to obtain the proper registrations. As unpleasant a task as it may be, don’t risk your business shutting down before it fully begins.

Conducting business without the proper licensing is a criminal offense in some states, while others hand out hefty fines. Here are some legal documents needed for a Frozen yogurt business.

  • Federal tax identification number
  • Business license
  • Food permit
  • Resale certificate
  • Certificate of occupancy
  • Insurance certificate
  • Alarm system permit

13. Write a Business Plan

Firms that offer foods and snacks grow because of the demand for these products and the Frozen yogurt business is sure one of the top five. Just as I already stressed, a good number of people love frozen yogurt as a healthier alternative to traditional ice cream cones; thus making the yogurt production business a profitable one.

If you have been looking to start a lucrative business of your own, a frozen yogurt production company is a very good option to consider. Though the frozen yogurt production business requires huge start-up costs, the business is very profitable, and you would regain your investment quickly. It is paramount that you conduct research to determine exactly what the public wants. This will also help you know if the frozen yogurt business will thrive in your locality.

One of the keys to success in any business is finding out what customers want and how they want it, and giving it to them the way they want it. During your research, you may find some fascinating information that will help build your business. Maybe there is untapped demand for certain varieties of frozen yogurt such as lactose-free frozen yogurt or frozen yogurt made with local, free-range milk. As an intelligent entrepreneur, you must investigate all opportunities, threats and possibilities

Writing a business plan will sure help you know your start-up and operation costs. It will also give you some information into who your potential customers are, who your competitors are, and how you can defeat your competition by developing your unique selling points. A business plan will also help you make projections and realistic plans for the future.

And it helps you define your specific expenses and how quickly you can build revenues. If you have taken the pain to conduct feasibility study, then writing a business plan would be a piece of cake because most of the work has already been done in the research phase.

14. Prepare a Detailed Cost Analysis

It is undeniably true that frozen yogurt is a very lucrative business with enough cash flow; there are still some challenges that accompany the business. What makes you successful in this business is your ability to tackle these challenges effectively. Outlined below is the cost analysis of starting a large scale frozen yogurt business.

  • 5 machines @$12,500 each – $62,500
  • 1 two door refrigerators– $2,000
  • 1 two door freezer- $2,000
  • Topping display with sneeze guard, – $2,500
  • POS System- $4,500
  • Other Kitchen equipment (hand basin, mop sink, 3 compartment sink) – $1,500
  • Supplies- $1,000
  • Tables, chairs, TVs and Wi-Fi – $5,000
Building costs
  • Build-out- $150,000
  • Signage- $5,000
  • Menu board- $2,000
  • Inventory- $4,000
  • Prepaid Expenses (lease deposit, utilities deposit, permits) $7,000
Professional Fees
  • Architect
  • Attorney
  • Accountant
  • Total 8,000
  • Insurance – $5,000
  • Automobiles – $25,000
  • Licensing – $3,000
  • Grand Opening Promotion – $3,000

Estimated Total- $293,000

From our well detailed cost analysis above, you will understand that it will cost you $293,000 to start a large scale frozen yogurt business and $131,560 to start a medium scale frozen yogurt business. A small scale frozen yogurt business is estimated at $23,850.

15. Raise the Needed Startup Capital

If you have all the incentives you need, then you are good to go. But if you need additional funds before you can kick start your frozen yogurt business, you will need to approach an investor, the government, a bank, or some other loan-giving establishment.

This is where your business plan will have to become even more instrumental. If your business plan is compelling and portrays a bright future for your business, then investors would be willing to fund it. Ways of getting funds may include:

  • Raising initial capital from family and friends
  • Getting Capital from angel investors
  • funds from Venture capitalists
  • Taking your company public through IPO
  • Getting small business loans
  • Getting funds through Crowdfunding
  • Raise Funds through Mergers and Acquisitions
  • Finance your Business Expansion with Equipment Leasing

16. Choose a Suitable Location for your Business

The location of your business can in a very great way dictate its success or failure. You have to a conduct research as to the best place to locate your business. Also, you need to determine if your business would have a retail component. This can fetch you a large volume of small profit sales, but you will need more investment costs.

Visit shopping malls, outdoor marketplaces, downtown areas and locations that receive heavy foot traffic due to the proximity to restaurants, movie theaters, grocery stores and local entertainment, such as theme parks or miniature golf courses. Choose a location with ample counter and display space, room for seating, freezer space and a commercial kitchen for preparing frozen yogurt and other items.

17. Hire Employees for your Technical and Manpower Needs

When starting your frozen yogurt business, you will need to get facilities such as a shop or warehouse, a production factory, and an administrative office. You can either lease these facilities or develop them on your own. But always consider that the latter option would cost more. For a start, you must keep all your component facilities within one location. You can separate them later when your business starts to expand.

You need to understand that you will need to purchase the major equipment and material needed to run your frozen yogurt production business. You will need digital scales for measuring frozen yogurt weight, self-serve machines, caddies for displaying toppings, such as fresh fruit or crushed candies, freezers, warmers for fudge and caramel sauce. Don’t forget that you will also need standard business office items, including a fax machine, telephone, credit card machine and register.

When starting your frozen yogurt business, you have to hire few staff. Hire the most suitable and experienced individuals for each position, and give them the necessary training they need to play their roles well. Nothing brings success faster than teamwork and dedication.

The Service Delivery Process of the Business

Frozen yogurt usually is primarily made up of milk solids, some kind of sweetener, milk fat, yogurt culture, natural or artificial flavourings, and sometimes natural or artificial colouring. Milk fat make up about 0.55–6% of the yogurt. Added in quantities inversely proportional to the amount of milk solids, the milk fat lends richness to the yogurt.

Milk solids make up 8–14% of the yogurt’s volume, providing lactose for sweetness and proteins for smoothness and heightened resistance to melting. Cane or beet sugar provides 15–17% of the yogurt’s ingredients. In addition to adding sweetness, the sugar raises the volume of solid ingredients in the yogurt, improving body and texture.

Animal gelatine and/or vegetable additives (guar gum, carrageenan, etc.) stabilize the yogurt, reducing crystallization and heighten the temperature at which the yogurt will melt. This stabilization makes sure that the frozen yogurt remains a smooth regardless of handling or change in temperature.

Most yoghurt makers often use assembly lines specifically dedicated to frozen yogurt production. The milk products and stabilizing agent(s) are added together and homogenized. At 32 °C, the yogurt culture is added. The mix remains at this temperature until it sets and is ready for cooling.

After that stage, the mix is cooled at a temperature of 0 to 4 °C. Once it has reached the wanted temperature and viscosity, the yogurt is allowed to sit in aging tanks for up to four hours. Sweeteners, flavourings, and colourings are then added, and the yogurt mixture is cooled at a temperature of −6 to −2 °C.

To create extra volume and smooth consistency, air is incorporated into the yogurt as the mixture is agitated. When a considerate amount of air has been incorporated into the product, the yogurt is rapidly frozen to avoid the formation of large ice crystals, and stored in a cold place to be shipped. Frozen yogurt can be made in a soft serve freezer in almost the same way as soft ice cream.

Frozen yogurt mix is sold in powder form that needs to be mixed with water or liquid form ready to pour into a soft serve machine. A mix with high fat or low fat content can be chosen, and the quantity of air introduced into the soft serve frozen yogurt is variable. The greater the level of fat, the more air the yogurt can absorb; and the more air that is introduced into the mix as it freezes, the creamier the product will taste.

18. Write a Marketing Plan Packed with ideas & Strategies

Attracting people to try a scoop of your delicious frozen yogurt is one of the most important parts of establishing your frozen yogurt business. That simply means that your marketing strategies must get to a variety of target markets, such as families that want a cool treat on a hot day, employees from local businesses on their lunch break or people strolling through the mall.

Once people start trying your frozen treats, implement strategies that will convince them to return to your store, instead of going to your competitor’s yoghurt shop. Marketing ideas for your frozen yogurt business may include…

  • Host Events
  • Initiate Loyalty Program
  • Use the Social Media
  • Use the Press

19. Work Out a Reasonable Pricing for your Services & Products

When it comes to the issue of pricing for products such as frozen yogurts, there are no hard and fast rules or known price models, the prices will always depend on the size and packaging. Generally, the prize for frozen yogurts and similar products like ice cream and confectioneries are affordable hence there is no need to employ any detailed strategies when it comes to pricing.

In view of that sincere fact, your yoghurt prices should conform with what that is obtainable in the industry but it is your duty to ensure that within the first 6 to 12 months that your products are sold a little bit below the average prices of various frozen yogurt brands in the country. But you need to put in place business strategies that will help you run on low profits for a period of 6 months; it is a way of encouraging people to buy into your brand.

20. Develop Iron-clad Competitive Strategies to Help You Win

With the increasing competition in the frozen yogurt industry and stores coming up from every corner, you have to make consumers aware of your shop. Each community is different and some marketing tactics will work in some areas and others will not.

The key is to try different things and find what works for you. And remember that what worked yesterday, might not work tomorrow. The only limit to your marketing is your own creativity. Some ideas can be expensive, but there are plenty that are not.

  • School fundraisers with your local elementary school.
  • Coupon mailers.
  • Daily deal websites
  • Create a flavour contest
  • Loyalty programs
  • Group contest
  • Street marketing
  • Sponsor or advertise at local races
  • Social marketing
  • Cross market with local businesses
  • Online marketing

21. Brainstorm Possible Ways to Retain Clients & Customers

Your Current customers are the best asset your frozen yogurt business can have. They already know the brand, they know the products and they know their service. Focusing your time and energy on these individuals as against always trying to find new customers can be a powerful way to supercharge revenues for your frozen yogurt business, especially over the holiday season. There are many ways to retain and maintain your customers and make them to always want to come back. These ways may include:

  • Friendly employees
  • Satisfy your customers
  • Patronage discount and coupons
  • Loyalty and reward programs
  • Be lenient
  • Gamification
  • Help desks and support systems
  • Customer feedback survey
  • Light personalization

22. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

Brand awareness and affinity serves several objectives for retail companies seeking to increase sales in the marketplace and it can do same for your yoghurt business. A brand awareness campaign needs to be flexible enough to grow with the business and adjust if needed. Ways to promote brand awareness and create a corporate identity in your frozen yogurt business may include:

  • holding an event
  • exhibiting yourself
  • sponsor something
  • create an experiential stunt
  • take to social media, organize a public relation campaign
  • invest in promotional merchandise
  • Join forces with other businesses etc.

Cementing a good corporate identity through good brand awareness strategies with a little imagination and an understanding of your customer, the sky (and your budget) is the limit when it comes to getting in front of your competitors.

23. Create a Supplier/Distribution Network 

Supplier/Distributions networks are those important steps taken to move and store a product from the supplier stage to a customer stage in the supply chain. Distribution is an important factor that decides the overall profitability of your frozen yogurt business because it directly impacts both the supply chain cost and the customer experience.

Good distribution can be used to achieve a variety of supply chain objectives ranging from low cost to high responsiveness. The conventional distribution model has three levels: the producer, the wholesaler and the retailer. In the Frozen yogurt business, the direct distribution and supply should be the primary alternative distribution channel.

It means that you can be the producer and wholesaler that’s if you make the Yoghurts, and then sale to the end user to end the supply chain. But if you buy from a vendor, then you are the wholesaler who in turn sells to the consumers. Setting up a good supplier/Distribution Network will sure make your business lucrative and ways to do that may include:

  • Contact wholesale food vendors to order frozen yogurt or the ingredients to prepare frozen yogurt and other food products you plan to sell. Visit food vendor websites to compare prices and delivery options. Schedule times for deliveries.
  • Make arrangements with suppliers of the raw materials and ingredients that you will need. If possible, have more than one supplier for each ingredient, as this will prevent a hiccup in your business if a supplier runs out of stock.
  • Pursue distribution deals with existing businesses, such as cafes, restaurants, supermarkets, and snack stalls. Since you intend to produce yogurt, it goes without saying that you must have your buyers ready, or no one would buy your product.
  • Conducting research to figure the number of ready buyers around you will help you know the quantity of products to produce when you start full operation.

24. Tips for Running a Frozen Yogurt Business Successfully

To run your frozen yogurt business successfully, you must view everything from an owner’s perspective. Is your frozen yogurt great? Do you offer the top frozen yogurt flavours and rotate often? Is the staff motivated? Is the place clean, does it have good music and is it a fun and positive experience for the customer?

Indeed no place is perfect, not even Disneyland, but trying your best to make your business awesome. Things to consider may include:

  • Always be mindful of your quality
  • Try to create astonishing services
  • Create a comfortable atmosphere
  • Cleanliness