FDD Talk: sweetFrog Premium Frozen Yogurt 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 sweetFrog Premium Frozen Yogurt franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a sweetFrog Premium Frozen Yogurt franchise, based on Item 7 of the company’s 2019 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a sweetFrog Premium Frozen Yogurt franchise, based on Items 5 and 6 of the company’s 2019 FDD

• Section IV – Number of franchised and company-owned sweetFrog Premium Frozen Yogurt outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD

• Section V – Presentation and analysis of sweetFrog Premium Frozen Yogurt’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:

• average, median, high, and low monthly net sales for each of the 12 calendar months in 2018 for the current sweetFrog Premium Frozen Yogurt Franchised Shops that operated as Franchised Shops for the entire fiscal year 2018

• 2018 average and median annual gross sales for the top 10%, bottom 10%, and all current sweetFrog Premium Frozen Yogurt Franchised Shops that operated as Franchised Shops for the entire fiscal year 2018

Section I – Background Information

26 Things You Need to Know About the sweetFrog Premium Frozen Yogurt Franchise

Launches Rebranding and Aggressive Growth Plan After Acquisition

1.  In late September 2018, sweetFrog Premium Frozen Yogurt was acquired by a wholly-owned subsidiary of MTY Food Group, Inc., a Canadian franchisor and operator of numerous casual dining, fast casual, and quick service restaurants operating under more than 70 brand names. sweetFrog announced that it plans to take an aggressive and focused rebranding and acquisitions approach to expansion.

2.  In May 2018, for example, sweetFrog acquired five New York-based Hoopla Frozen Yogurt locations in Camillus, Middletown, New Hartford, Newburgh, and Poughkeepsie. By the end of the month, the stores were completely rebranded with new signage. Then, in July, sweetFrog took over two U-Swirl stores in Reno, Nevada. The chain made some subtle interior changes, as well as flipping the signage, and quickly had the stores up and running.

3.  The strategy, which will remain key moving forward, aligns with sweetFrog CEO Patrick Galleher’s background. He worked in finance and private equity, and led dozens of successful acquisitions as managing partner of Boxwood Partners, a merchant bank in Richmond, Virginia, including taking over sweetFrog in 2015.

4.  According to Galleher, “This is very similar to how banks grew during the 1980s and 90s, by rebranding local brands and buying community and local banks and making them into super regional banks. So what we’re doing is trying to find really good smaller chains, or owner operators who can benefit from having a better brand, a better product, and better supply chain. We can almost instantly make a store perform better by buying it and turning it into a sweetFrog.”

5.  In this case, the competition and relative uniformity of froyo shops nationwide is helping sweetFrog grow. Galleher says they’d love to get over the 500 mark. At the time of the press release, there were 71 corporate stores and sweetFrog was looking to plant some along the I-95 corridor since the chain doesn’t have any from Palm Beach, Florida, down to Miami. They’re also targeting some corporate growth in the Dallas-Fort Worth market.

6.  Galleher says the company-run footprint is important for a couple of reasons. One, the chain is open to buying back locations if an owner isn’t delivering sweetFrog’s brand promise. “We’ve proved very successful on turning around many locations after we’ve bought them back,” he says.

7.  Also, sweetFrog has an aggressive testing schedule that includes quarterly taste testing of new flavors and recipes at its corporate units. In June 2017, sweetFrog expanded its menu with the launch of Dole Whip, a product made famous in amusement parks. About 85 percent of stores feature smoothies. And there were some tests that didn’t hit, like donuts and custard.

8.  There’s plenty of room to grow corporately and through franchising, Galleher adds. sweetFrog has only five locations in California and, he says, the brand could easily have 200. “We haven’t done a ton of international development, either,” he says. “But we continue to evaluate as new opportunities come across. We still have a ton of opportunity.”

9.  As for what’s working for sweetFrog, and how it’s thriving in such a dynamic field, Galleher credits customer sentiment, community, and a unique flavor profile as the main culprits. He receives every online review from Yelp, Facebook, Google, and so on, in real time.

10.  “Information is the key to all businesses. And getting immediate feedback from the field, and customer experience is critical to making better decisions to improve that experience,” he says. “You’re always occasionally going to have a store that’s dirty after 14 kids come through the toppings bar. There’s no way to make sure that it’s 100 percent spotless for every customer when you’re as busy as we are. But you’ve got to make sure you’ve got the processes in place to keep it as clean as possible all the time.”

11.  sweetFrog, as the name suggests, makes a product that’s slightly sweeter than other brands. West Coast froyo chains tend to skew a bit tarter. “We want to be more kid friendly,” Galleher says. “We want to be more competitive to ice cream versus other frozen yogurts.”

12.  The other part of sweetFrog’s name – the “Frog” half – stands for “Fully Rely On God.” Beyond how that might appeal to religious operators and customers, Galleher says sweetFrog’s community-first approach to business is a key differentiator.

13.  sweetFrog hosts Leap Forward School programs that provide schools “a unique way to encourage students to reach greater heights,” the company says. This includes working with schools to offer free frozen yogurt cards for faculty to use in rewarding students. The company also teams up with teachers to develop educational field trips. The sweetFrog “Leap Forward Field Trip Kit” includes worksheets and hands-on activities that teach students about weight, temperature, mass, volume, graphing, currency, and more.

14.  There’s also a sweetFrog badge and patch program with the Girl Scouts that takes children on a behind-the-scenes tour. “The way we execute that on a day-to-day basis is we really want to be part of the community. We want to make sure families feel like they’re going to a safe, clean, friendly environment. We really want to make sure that local PTAs and local church groups feel like they can do fundraisers with sweetFrog in a safe environment,” he says. “We really want our owner/operators to be involved in the communities, and not just another retail food establishment.”

Signs New Franchise Agreement for Virginia

15.  At the end of January 2020, sweetFrog Premium Frozen Yogurt signed a new franchise agreement with partners Kimberly Douglas and Jennifer Roseboro. The pair will open a colorful mobile truck with three frozen yogurt machines and two topping bars, in Fairfax County. The sweetFrog mobile location was expected to be up and running in the spring of 2020.

16.  sweetFrog is a proud member of VetFran and is committed to helping America’s first responders and military service members and veterans with entrepreneurship opportunities, which intrigued Douglas and Roseboro. Prior to hopping into business ownership, Douglas worked for 14 years as a police officer and team leader on the anti-terrorism team. She also is a celebrated veteran with the US Army.

17.  John Wuycheck, senior vice president of franchise development for sweetFrog Premium Frozen Yogurt, said, “Kimberly and Jennifer are great additions to the sweetFrog family. With Kimberly’s military experience and their combined dedication and commitment to sweetFrog, they are ready for success as sweetFrog franchisees. We know McLean and the surrounding areas will be well-served by Kimberly and Jennifer.”

18.  Douglas, Roseboro, and every sweetFrog franchisee have the benefit of unrivaled franchisee support from Kahala Brands (a wholly-owned subsidiary of Canada-based MTY Food Group, Inc.) and its affiliates. Every franchisee has full access to an R&D team with chefs dedicated to sweet and savory menu innovations, an in-house social media team, an in-house creative team to help with ads, promos and coupons, a full-service construction team, a hands-on week-long training program, continuing education, and more.

Launches Promotion in Support of Penguin Young Readers to Celebrate 50th Anniversary of The Very Hungry Caterpillar

19.  In late June 2019, sweetFrog Premium Frozen Yogurt launched a new summertime swirl, The Very Berry Apple Swirl, to celebrate the 50th anniversary of the award-winning children’s classic picture book, The Very Hungry Caterpillar, in partnership with Penguin Young Readers.

20.  The Very Berry Apple Swirl is the perfect blend of sweet and tart combining Farm Stand Strawberry Ice Cream and Green Apple Sorbet, two fruits the book’s beloved caterpillar ate his way through to satisfy his hungry tummy. The promotional flavor was available from June 23 through August 24.

21.  Morgan Harrison, senior national marketing manager for Kahala Brands, parent company of sweetFrog, said, “We are delighted to partner with Penguin Random House to celebrate the 50th anniversary of The Very Hungry Caterpillar. The Very Hungry Caterpillar is a timeless children’s book whose fans span generations, and we are honored to be a part of its storied history.”

Company History

22.  sweetFrog Premium Frozen Yogurt was founded in 2009 by Derek Cha in Richmond, Virginia. At the time, frozen yogurt shops were mostly located on the West Coast of the U.S. and Cha saw the opportunity to bring the frozen treat to a different part of the country.

23.  Cha, who is very religious, prayed with his wife for a new business venture and settled on frozen yogurt because of its simplicity and low cost. The company was founded on Christian principles and, according to Cha, the “Frog” part of sweetFrog’s name stands for “Fully Rely On God.”

24.  Cha started franchising the sweetFrog concept not long after opening the first store. By the spring of 2012, the company had grown to 100 locations. The following year, sweetFrog started opening international locations and at the time, Cha said that his goal was to have 1,000 U.S. locations and 1,000 international stores opened by 2020 (sweetFrog is a long way from reaching this goal).

25.  In 2018, sweetFrog was acquired by a wholly-owned subsidiary of Canada-based MTY Food Group, Inc. At the time of the acquisition, sweetFrog had 332 locations (both company-owned and franchised) in the United States and abroad.

Entrepreneur’s Franchise 500

26.  sweetFrog Premium Frozen Yogurt did not rank on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of sweetFrog Premium Frozen Yogurt franchise costs, based on Item 7 of the company’s 2019 FDD.

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

• Please click here for detailed information on sweetFrog Premium Frozen Yogurt’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2016

• Outlets at the Start of the Year:  191
• Outlets at the End of the Year:  194
• Net Change:  +3

2017

• Outlets at the Start of the Year:  194
• Outlets at the End of the Year:  189
• Net Change:  -5

2018

• Outlets at the Start of the Year:  189
• Outlets at the End of the Year:  258
• Net Change:  +69

Company-Owned

2016

• Outlets at the Start of the Year:  55
• Outlets at the End of the Year:  65
• Net Change:  +10

2017

• Outlets at the Start of the Year:  65
• Outlets at the End of the Year:  73
• Net Change:  +8

2018

• Outlets at the Start of the Year:  73
• Outlets at the End of the Year:  0
• Net Change:  -73

Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis

• Tables 1 and 2 reflect historical financial performance information related to sweetFrog’s current Franchised Shops that operated as Franchised Shops for the entire fiscal year 2018.

• Tables 1 and 2 include the following characteristics: (i) all are in a location in the United States; (ii) all offer a full menu and use the same recipes; (iii) all were open for a minimum of 12 months; (iv) all operate under the same trademarks; and (v) all were franchised.

• The time period measured was January 1, 2018 through December 31, 2018.

• The information in Table 1 and Table 2 includes only sales information for the included Franchised Shops, so you should not draw any inferences with respect to any Franchised Shop’s historic costs and expenses, or profitability, based on this information, because that information is not presented.

• Data for Tables 1 and 2 was polled from the POS systems at Franchised Shops, with limited manual entry (e.g., when connection issues resulted in automatic polling failures). The information is unaudited.

• Some outlets have earned these amounts. Your individual results may differ. There is no assurance that you will achieve the stated results.

Part 1 – Historic Average and Median Net Sales of Select Franchised Shops Along With High and Low Net Sales by Date Range for Date Ranges From January 1, 2018 to December 31, 2018

January 1 to 31