Froyo Has Private Equity Smacking Its Lips

frozen yogurtIn an article posted on their website, “What Private Equity Loves About The Booming Frozen Yogurt Trend,” looks into a retail industry phenomenon.
Given the strong presence Sintel Systems has in the frozen yogurt segment of the restaurant POS marketplace, we share these stories with our customers and franchise hopefuls looking for key opportunities. We also happily share our vast experience and expertise in the frozen yogurt market sector and geographic growth trends with startup owners in order to help them make the best decisions from the very beginning.
Private Equity (PE) firms make it their business to spot trends early and invest in smaller businesses poised for explosive growth.  They imagined, in froyo’s ascendancy, customers seeking healthier alternatives to ice cream and other high-calorie desserts, along with lowering calories and the economical benefit of self-serve.
In the post, CNBC listed a number of private equity froyo investments:
– TCBY/The Carlyle Group (later sold to Z Capital Partners)
– Red Mango/CIC Partners
– Sweet Frog/Boxwood Capital Partners
– Pinkberry/Maveron (co-founded by Starbucks chairman Howard Schultz)
It’s important to note that this “craze” began slowly in the early 1980s with TCBY (originally “This Can’t Be Yogurt,” which evolved into “The Country’s Best Yogurt”).
But it was a rocket called Pinkberry, launched in West Hollywood, CA in 2005 with unique tart flavors and fruit toppings, that took froyo into low Earth orbit.
A year later Yogurtland and South Korean chain Red Mango opened their first American stores in, where else? Trend-setting California.
“By 2007, there were an estimated 983 frozen-yogurt shop locations in the United States, according to market research firm IBISWorld,” writes. “Today, there are 1,227 shops in the U.S. spread among 268 companies, according to IBISWorld estimates.”
Today, estimates the frozen yogurt market will generate $800 million in annual revenue, with 3,000+ employees earning $65.9 million in wages, and most stores being from the following six brands; TCBY, Pinkberry, Red Mango, Menchie’s, Yogurtland and Orange Leaf Frozen Yogurt., quoting a 2012 report from IBISWorld research, says froyo locations mostly concentrated in California (33%), New York (14.5%), Florida (6.8%), Texas (5.5%) and Georgia (3%).
“There are still growth opportunities within the frozen yogurt stores industry, especially in untapped markets,” quoted IBISWorld industry analyst Nikoleta Panteva.
Although froyo first emerged in denser metropolitan areas and college towns with health-conscious consumers, Panteva now sees a nationwide trend, including suburban neighborhoods. “IBISWorld anticipates the expansion to continue underpinning growth for the industry over the next five years.” However, Panteva cautions, “Still, the projected revenue increases will be subdued compared to the industry’s performance over the past five years because most markets have already been tapped.” concludes the article with an up-close look at the frozen yogurt chain Orange Leaf, whose chief executive, Reese Travis, remains bullish on froyo.
Travis, formerly with Wexford Capital, sees “a lot of room for growth.”
“There are really no scaling constraints, as we have proprietary items that are ready and available for rapid expansion. We see our store count continuing to grow in the U.S. and abroad in the coming years.”
Orange Leaf began in Oklahoma City, OK in 2008, quickly growing to 15 U.S. stores by 2010, 125 by 2011 and more than 300 today (three in Australia). Travis says 80 more are under construction.
Orange Leaf’s current annual sales projections are more than $100 million. The company may consider a PE investment, or go public, as early as 2015. Travis said, “Private equity has always been considered ‘smart money’ and to be involved in an industry that has attracted the likes of Howard Schultz, I’ll put a wager on that bet any day.”
Before you make your franchise move, consider calling Sintel Systems for a free phone consultation to help weigh and understand your options. We serve as a franchise incubator for clients across the retail, restaurant and service industries, forming lasting partnerships with our clients that you simply can’t get from a reseller.
Read the full post here.
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