To read the first part of my interview with Larry Sidoti, please click here.
Franchise Chatter (FC): What were some of the main challenges you faced this past year, and what did you do to deal with them?
Larry Sidoti (LS): Finding enough good sites. The market for great sites is highly competitive. The demand for 1,200-1,500 square foot space is high and with little in the way of new development, we have to deal mostly with second generation space. That presents a number of challenges. We have to be aggressive but selective.
One key objective is that each and every site is selected based on the assumption that the site will exceed our current systemwide average unit volume. This objective is as much a responsibility of the Development team as it is for the Operations team.
We have a very experienced in-house real estate team with some of the most talented people in the industry that work closely with our franchise partners. The real estate piece is extremely important and not something we farm out or leave in the hands of others. We have invested in building a tremendous in-house real estate team that gives us an edge in overcoming real estate challenges while minimizing mistakes.
As I mentioned previously, we increased our corporate team by more than 50%. That is a significant change, and change of that magnitude can be challenging, as well as a threat to our company culture. Our integration process was flawless and not only did our culture not struggle, it was greatly strengthened and significantly enhanced. I consider that a testament to an excellent HR department and even more so to a great team of professionals throughout the company that not only accepted the change but embraced it.
FC: As you continue to expand to cities with colder climates, what are you doing to manage the seasonal aspect of the frozen yogurt business?
LS: Selecting great locations and pairing them with great franchise partners. This is an art and it’s our formula for success in each new market, including the states and regions with adverse weather.
Our Operations and Marketing teams kick in to support our franchise partners with the intent to mitigate the impact of adverse weather. This is where our franchise partners really experience the benefit of a brand built from a solid support structure. As I mentioned earlier, we have a very experienced team that is focused on providing the highest level of support to our franchise partners.
We have creative initiatives that are implemented across the chain that not only deal with the seasonal changes but also the psychological
changes that alter buying habits throughout the year. Unfortunately, I can’t really elaborate on specific strategic initiatives, however I can divulge that an experienced and talented team gives us a competitive advantage.
FC: What are your thoughts on the influx of new frozen yogurt brands? Do you think this category is getting saturated?
LS: First and foremost, it validates the growing popularity of frozen yogurt. I love the entrepreneurial spirit and the drive to be your own boss. In an industry like this where the barriers of entry are fairly low, you get this influx of new brands and in some regions, this leads to saturation and ultimately consolidation. We’ve seen consolidation begin in California and anticipate it will happen throughout the country.
Unfortunately, because of the ease of entry, this is naturally a copycat category. Rather than create a unique niche, most of the new players are simply entering the category with minor tweaks of the larger brands. That is what’s so remarkable about the Yogurtland story.
When Phillip Chang launched this concept, the frozen yogurt category was trending towards a traditional full-service footprint led by Pinkberry and Red Mango. There was no self-serve model. Phillip went in an entirely different direction when he introduced this self-serve model in 2006, and thus created an entire category. He created an interactive experience for customers by offering a wide selection of flavors and toppings that broadened the customer base and ultimately redefined the industry.
Phillip entered an emerging category with a unique idea. There is little to none of that with this influx of new players. In some cases, some of the newer brands do not even bother to modify the trade dress thus triggering customer confusion.
In any specialty category such as the frozen yogurt segment, there is typically consolidation. As competition heats up in each market, those brands that create clear points of distinction and stand out from the crowd will survive. Typically, a few brands will survive and thrive. The rest typically shake out.
FC: What are your growth targets in 2012, and what regions of the country are you targeting for further expansion?
LS: We do have specific regions we are targeting with both franchise and corporate stores. We have carefully and thoughtfully laid out the next seven years. For 2012, we are targeting 240 stores by year end. Our primary objective is to maintain our current average unit volumes, which in turn maximizes store level profitability.
Three key variables influence our decision-making as it relates to numerical targets: good real estate, great franchise partners, and maintaining our high average unit volumes. These are the drivers that motivate our team to focus on the right decisions and not store count. Again, we believe these are the key variables that drive a brand to long term sustainability.
FC: Is there anything else you wish to share about Yogurtland?
LS: Yogurtland is not only a great brand with a proven track record and a solid business model, but it is a great company to be a part of. Our number one asset is our people. Everyone associated with our company possesses an unbridled passion and love for the Yogurtland brand, company, and culture.
The loyalty exemplified by our corporate team and franchise partners is fierce and is further reflected in our legions of great customers. Our corporate team and franchise partners work extremely hard and have a lot of fun building Yogurtland into the best and most recognizable brand in the frozen yogurt category. This is just an absolutely wonderful brand to be a part of.