Wednesday, May 16, 2012

Profitability by the ounce

A few of us at the Louisiana Restaurant Association where talking about frozen yogurt and which of us had visited which establishments. There's Pinkberry, Red Mango, Cherry Berry, Menchies, Yogurtland, Tutti Frutti, Pure Yogurt Culture, FrostBite and one other that has yet to open on the highly trafficked Magazine Street in New Orleans.
It's the middle of May and already the temperatures in
Louisiana are in the 90s. No doubt frozen yogurt will be
a cooling option this summer for consumers.
This discussion got us to talking about why these places are opening so rapidly and we came to a few conclusions. The real estate needs of yogurt bars are relatively small and range between 500 and 1000 square feet at most. Also, on most of our visits to the self serv spots, there was only one employee working. At Pinkberry, anywhere from two to five employees were manning the store and in some cases, the lines were literally out of the door.

The product itself is poured into the machine (many of which can be rented or leased from an equipment company) as liquid and then air is churned through until it solidifies and becomes creamy yogurt. So all in all, startup costs appear to be lower than a restaurant.

From a profitability angle, self service seems to be a more advantageous model as the smallest cup size is comparable to a large size cup at Pinkberry. On our trips to three self serve bars, we filled our cup to nearly 10 ounces each time. Prices were consistent with the exception of Yogurtland which was significantly less by $2. We opted out of the toppings to forgo the added calories.

In line at Pinkberry, we noticed that after the server filled the cup, they then dropped it on a scale to measure portion size. That’s a solid practice that other segments could adapt to control food costs.

While this trend just landed in Louisiana in the last year, according to IBIS Worldwide, the yogurt industry is actually in a mature phase in the growth cycle and they anticipate the rate of growth will slow to .3% annually through 2016.

At the National Restaurant Association Show in Chicago last year, frozen yogurt dominated the show floor. Everytime we turned the corner we were trying a new yogurt brand and flavors that were traditional, tart and tangy. This year in Chicago, not so much.

If you like the tart, these establishments have it in spades—Mango, pomegranate, original tart, passionfruit, watermelon and lychee. If you’re a traditionalist when it comes to flavors, you’ll find chocolate, vanilla and strawberry. Ice cream flavors have also arrived with cheesecake, oatmeal cookie, red velvet cake, cookie dough, chocolate milk shake, vanilla wafer and peanut butter, among others.

With an already pretty hot May, there’s no doubt these places will do well this summer. With a low unemployment rate and accessibility of the shops, we predict they will be around for a while.

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