FDD Talk 2018: Pinkberry Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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 2018 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Pinkberry franchise, based on Items 5 and 6 of the company’s 2018 FDD

• Section IV – Number of franchised and company-owned Pinkberry outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD

• Section V – Presentation and analysis of Pinkberry’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:

• 2017 average and median gross sales for the top 20%, bottom 20%, and all 108 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 respective samples that met or exceeded the average and median gross sales

Section I – Background Information

13 Things You Need to Know About the Pinkberry Franchise

Launches New Promotion in Support of Universal Pictures’ Mamma Mia! Here We Go Again

1.  At the beginning of July 2018, Pinkberry launched a new menu item as part of its licensing agreement in support of Universal Pictures’ Mamma Mia! Here We Go Again film. To promote the new movie, Pinkberry has created Mamma Mia! Mango, a special limited-time combination featuring the new Passion Mango tart frozen yogurt flavor, along with fresh cut mango and honey almond granola. Pinkberry also gave fans of Mamma Mia! a chance to win a trip for two to the London premiere of the movie by entering a sweepstakes on Pinkberry’s website.

2.  This isn’t the first time that Pinkberry has partnered with Universal Pictures to promote one of its movies. Last fall, Pinkberry held a contest for fans to win a trip for two to attend the premiere of Pitch Perfect 3. To enter the contest, fans were asked to take a picture of their favorite Pinkberry swirl, give their creation a name related to the movie, and share it on social media using the hashtag #PitchPerfectPinkberry.

Fans Vote to Bring Back Meyer Lemon

3.  Pinkberry often engages with its customers and listens to feedback through several channels, including the brand’s Bring Back My Swirl Survey. In early March 2018, Pinkberry announced that customers voted for the return of their favorite frozen yogurt from 2017, Meyer Lemon. The popular flavor first debuted in spring 2017 and became an instant hit. The flavor became even more popular after being mentioned by Oprah Winfrey on social media.

4.  Meyer Lemon returned nationwide for a limited time until April 26, 2018, but local stores have the option to continue carrying the flavor after the promotion ends. To celebrate the flavor’s comeback, Pinkberry created a new combination, Lemon Berry Tart, which features vanilla wafer cookies, blueberries, and whipped cream.

5.  Melissa Hubbell, director of marketing for Pinkberry, said, “Our fans let their cravings be heard and Pinkberry is making sure they’re satisfied. Meyer Lemon is truly a stand out flavor; it’s no wonder fans wanted it back. In fact, lemon is trending this year and is a go-to flavor for desserts, so we couldn’t be happier to have Meyer Lemon return to our menu as a refreshing springtime treat.”

Celebrates National Frozen Yogurt Day with BOGO Deal

6.  To celebrate National Frozen Yogurt Day on February 6, 2018, Pinkberry offered a special buy-one-get-one-free deal and bonus prize for all Pinkcard rewards members, including a chance to win three free Pinkberry swirls. The BOGO deal was good for an original frozen yogurt with toppings, of equal or lesser value.

7.  Additionally, Pinkcard rewards members who made any purchase on National Frozen Yogurt Day randomly received one of six unique bonus prizes, which were loaded to their loyalty card or account. Prizes included free toppings, additional BOGOs, double points, and one, two, or three free swirls with toppings. In order to receive the BOGO deal and bonus rewards, customers needed to have a registered Pinkcard account.

8.  Melissa Hubbell, director of marketing for Pinkberry, said, “This great deal is our way of rewarding our loyalty members and thanking them for being our devoted fans. Being a Pinkcard member truly has a lot of perks and it’s so easy and free to join. We encourage all frozen yogurt fans to sign up and celebrate National Frozen Yogurt Day with us and continue earning rewards all year long.”

Company History

9.  The first Pinkberry store was opened in 2005 by Shelly Hwang and Young Lee in West Hollywood, California. Hwang and Lee initially tried to open a formal English tea house at the site they selected for their new business venture but were unable to secure an alcohol permit from the city. They went with their backup plan, which was to open a frozen yogurt shop reviving the frozen yogurt craze from the 1980s. Pinkberry was immediately successful and so popular that customers were waiting up to 30 minutes in line.

10.  In 2006, Hwang and Lee started franchising the Pinkberry concept and the second store opened later that year. After receiving a $27.5 million investment from Maveron, the venture fund founded by Starbucks founder Howard Schultz, Pinkberry started expanding across the United States. Around late 2009, Pinkberry opened its first international location in the State of Kuwait.

11.  Inspired by Pinkberry’s initial success, numerous frozen yogurt franchises started popping up around the country and saturated the market. This has led to a decline in Pinkberry’s popularity and number of locations.

12.  In 2015, Pinkberry was acquired by Kahala Brands and its headquarters was moved to Scottsdale, Arizona. Hwang still serves as Pinkberry’s chief product officer and board director, while Lee stepped down from the company following personal troubles.

Entrepreneur’s Franchise 500

13.  Pinkberry did not rank on Entrepreneur’s 2018 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Pinkberry franchise costs, based on Item 7 of the company’s 2018 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Pinkberry’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2015

• Outlets at the Start of the Year:  140
• Outlets at the End of the Year:  110
• Net Change:  -30

2016

• Outlets at the Start of the Year:  110
• Outlets at the End of the Year:  101
• Net Change:  -9

2017

• Outlets at the Start of the Year:  101
• Outlets at the End of the Year:  96
• Net Change:  -5

Company-Owned

2015

• Outlets at the Start of the Year:  14
• Outlets at the End of the Year:  29
• Net Change:  +15

2016

• Outlets at the Start of the Year:  29
• Outlets at the End of the Year:  21
• Net Change:  -8

2017

• Outlets at the Start of the Year:  21
• Outlets at the End of the Year:  16
• Net Change:  -5

Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis

• The average gross sales amounts contained in the table below pertain to the historic performance of all Pinkberry franchised and corporate stores located in the United States that were open for at least 12 consecutive months. The time period measured was December 1, 2016 through November 30, 2017.

• As of November 30, 2017, there were 112 stores open in the United States. Of the 112 stores, 108 were open for 12 consecutive months and the remaining 4 stores were excluded due to being open for less than 12 consecutive months.

• All of the stores measured share the following characteristics: (i) all are located in the United States; (ii) all use the same recipes; (iii) all were open for a minimum of 12 months; and (iv) all operate under the same trademarks.

• The information in the table is based upon gross sales of franchised stores. Some stores had gross sales that exceeded the average gross sales. Pinkberry is not representing that your franchised store will meet or exceed the average gross sales of the franchised stores.

• The figures in the table below should not be considered a representation of the probable gross sales you should expect or a forecast of future performance. Pinkberry is not representing that your franchised store will meet or exceed the average gross sales in the table below. Your sales may differ from those in the table below. There is no assurance that you will earn as much as the stores listed in the table.

• The table below and information were prepared from sales reports provided to Pinkberry by franchisees. Pinkberry has not audited the information provided by the franchisees.

All Stores – Franchised and Corporate