Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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FDD Talk: The Pinkberry Franchise Opportunity (Financial Performace Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on January 9, 2017

in FDD Talk 2017: Food Franchises, Franchise Earnings, Frozen Dessert Franchise, Frozen Yogurt Franchises

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Pinkberry Frozen Yogurt Franchise Photo by mezzoblue

In this FDD Talk post, you’ll learn the following:

  • Section I – Background information on the Pinkberry franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Pinkberry franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Pinkberry’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average and median gross sales for the 132 franchised and corporate Pinkberry stores located in the United States that were open for at least 12 consecutive months
  • number and percentage of Pinkberry stores in the sample that met or exceeded the average and median gross sales, separately stated

Section I – Background Information

Kicking Off the New Frozen Yogurt Trend

The first Pinkberry store was opened in 2005 in Los Angeles by Hye Kyung Hwang and Young Lee. The founders had initially wanted to open a teahouse but failed to procure a liquor license. The pair decided to go with plan B and opened a frozen yogurt shop instead. This new frozen yogurt shop, dubbed Pinkberry, would revive the American frozen yogurt craze of the 1980s.

The first shop quickly drew large crowds. Pinkberry’s second location opened in 2006, which is the same year that franchising officially began for the company.

In late 2007, investment firm Maveron, the venture fund started by Starbucks founder Howard Schultz, invested $27.5 million to help Pinkberry continue its expansion. After a second round of funding of $9 million in 2009, Pinkberry made plans for further expansion in the U.S. and internationally. The first international location opened in the State of Kuwait in 2009.

The success of Pinkberry sparked a renewed interest in frozen yogurt and a multitude of competitors saturated the market. In 2015, Lee and Hwang sold Pinkberry to Kahala Brands for an undisclosed amount. Hwang continues to serve as the company’s Chief Product Officer and Board Director.

Today, Pinkberry has more than 200 locations throughout the U.S. and in 20 countries.

Kahala Brands Buys Pinkberry

In December 2015, Kahala Brands acquired Pinkberry for an undisclosed amount. This acquisition marked the fourth new brand that Kahala acquired in 2015. The three other brands are Planet Smoothie, Tasti D-Lite, and Maui Wowi. Kahala is also the owner of Blimpie and Cold Stone Creamery.

Despite Pinkberry’s success in the decade since it launched, all the competitors with similar concepts that the company spawned have cut into its revenue. Pinkberry’s average unit volume fell 16.2 percent in 2014, on top of a 5.7 percent decrease the year before, to $559,571.

After the acquisition, Kahala moved and consolidated Pinkberry’s L.A. headquarters with its own Scottsdale, Arizona headquarters.

New and Seasonal Offerings

Although Pinkberry has a lot of competition, it continues to differentiate itself by offering new and innovative menu items. Over the summer of 2016, Pinkberry launched its first ice cream. The new low-fat dairy milk ice cream is called Pinkbee’s. In early June, Pinkberry launched the new ice cream stating “this low-fat milk ice cream combines the creaminess and quality of traditional ice cream with a health-conscious approach.”

At the launch of Pinkbee’s, the frozen yogurt chain offered customers the signature flavor for the line, the Pinkbee’s Honeycomb Drizzle, featuring the ice cream drizzled with honey and topped with a real piece of honeycomb.

In early 2015, Pinkberry released its first non-dairy frozen yogurt, Tropical Mango, which is made from only five ingredients:  fruit, fruit juice, water, citric acid, and natural flavors.

In addition to introducing new menu items, Pinkberry often releases seasonal flavors. For the 2016 holiday season, Pinkberry offered Peppermint Cookies and Cream. The holiday flavor launched in early November and ran until January 3, 2017.

New to Entrepreneur’s Franchise 500 List

Despite being the frozen yogurt franchise to kick off the modern frozen yogurt craze, Pinkberry only started to rank on Entrepreneur’s Franchise 500 list in 2014, when it was No. 251 on the annual list. In 2016, Pinkberry ranked at No. 228, up from 2015’s spot at No. 245.

Section II – Estimated Costs

  • Please click here for detailed estimates of Pinkberry franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis

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