I Built a $100M Frozen Yogurt Empire in 11 Minutes

Summary

The video script discusses the economics and psychology behind frozen yogurt stores, revealing that while they may seem profitable, the reality is more complex due to costs and franchise fees. It shares insights on store operations, including average sales, margins, and the impact of franchise structures on profitability. The speaker also explores strategies like self-serve pricing, default options, and the importance of word-of-mouth marketing. Additionally, the script highlights the potential for purchasing equipment from failed businesses to reduce startup costs and emphasizes the power of customer experience and promotions in driving business success.

Takeaways

• 💰 Frozen yogurt stores typically make between $750,000 to $800,000 a year, but the actual owner's pay averages around $328 per day with a 10-15% profit margin.
• 🔍 The average Menchie's owner earns about $93,000 a year, highlighting that the business is not as lucrative as it might seem due to various operational costs.
• 📊 Franchises often take a significant portion of the profits, with some taking up to 60% of the take-home pay, which is substantial considering the already tight margins.
• 🏪 Buying into a franchise can be expensive, but it may offer savings on bulk purchasing due to the scale of the franchise's operations.
• 🛒 Starting a franchised frozen yogurt store can be cost-effective by purchasing equipment from failed franchises at a fraction of the original cost.
• 🍓 The average cup size is eight ounces, with a mix of 25% toppings and 75% yogurt, which is more profitable for the store as toppings are more expensive.
• 🍨 Yogurt costs about eight cents per ounce to the store, while they can charge up to $0.60 per ounce, showing a significant profit margin on the primary product.
• 📉 The frozen yogurt market is highly competitive with little differentiation between brands, making it difficult to stand out without exceptional service or experience.
• 📈 High-performing stores focus on better service, cleanliness, more selection, and word-of-mouth marketing to attract customers.
• 📱 For businesses with low average ticket prices, word-of-mouth and strategic partnerships are more cost-effective customer acquisition strategies than paid advertising.

Q & A

How much money does an average frozen yogurt store make per day?

An average frozen yogurt store makes between $750 and $800 per day.

What is the average annual income for an owner of a frozen yogurt store?

The average annual income for an owner is around $328,000, but after expenses, the take-home pay is significantly less.

What is the typical profit margin for a frozen yogurt store?

The profit margins for frozen yogurt stores typically range between 10 and 15 percent.

How much does the average Menchie's owner make in a year?

The average Menchie's owner makes about $93,000 a year in take-home pay.

What percentage of revenue do most franchises take from their franchisees?

Most franchises take around 6 percent of the top line revenue from their franchisees.

How can one acquire frozen yogurt store equipment at a lower cost?

One can acquire frozen yogurt store equipment at a lower cost by purchasing from business foreclosure sites or directly from stores that have gone under.

What is the average cup size for frozen yogurt sold in stores?

The average cup size for frozen yogurt sold in stores is eight ounces.

What is the typical cost per ounce for yogurt and toppings in a frozen yogurt store?

Yogurt costs about eight cents per ounce, while toppings can cost between 10 and 40 cents per ounce.

How do frozen yogurt stores encourage customers to buy more yogurt?

Frozen yogurt stores encourage customers to buy more yogurt by offering self-serve options and by structuring the serving process to fill the cup primarily with yogurt before adding toppings.

What is the significance of the default option in selling frozen yogurt?

The default option in selling frozen yogurt, such as offering only larger cups, encourages customers to use more yogurt and can lead to increased sales without the store taking the blame for higher costs.

How do successful frozen yogurt stores acquire customers cost-effectively?

Successful frozen yogurt stores acquire customers cost-effectively through word of mouth, better service, cleaner stores, more selection, and by partnering with local organizations for promotions.

Outlines

00:00

🍨 Insights into the Frozen Yogurt Business

The speaker shares their knowledge about the frozen yogurt business, which they almost entered instead of starting a gym. They discuss the average daily earnings of a yogurt store, which is around $21,000 per year selling 500 cups at 8 ounces each. The speaker reveals that while the average annual revenue for a store is between $750,000 to $800,000, the actual owner pay is around $328 per day with a 10-15% profit margin. They also touch upon the high costs associated with running such a business, including perishable goods, equipment maintenance, and franchise fees that can take up to 60% of the take-home pay. The speaker suggests looking into business foreclosure sites to acquire equipment at a fraction of the cost, which can significantly reduce startup expenses.

05:01

📈 Pricing Strategies and Consumer Behavior in Frozen Yogurt Stores

The speaker highlights the pricing strategy used by frozen yogurt stores, where customers pay based on the amount of yogurt they serve themselves, giving them a sense of control and making them more likely to spend more. They mention how removing smaller cup sizes led to increased sales, as customers tend to fill larger cups more. The speaker also discusses the psychological impact of presenting items in a specific order, starting with the highest margin items, and how this influences customer choices. They emphasize the importance of word of mouth and customer referrals for acquiring new business, especially when paid advertising is not cost-effective. The speaker shares their own marketing strategy, which involved creating an overwhelming selection of toppings and partnering with universities and local businesses to increase customer traffic.

10:02

🚀 Leveraging Failures and Defaults to Succeed in Business

The speaker provides insights on how to leverage the failures of others to reduce startup costs, suggesting purchasing equipment from failed businesses at a fraction of the price. They discuss the power of default options in consumer behavior, using the example of frozen yogurt stores removing small cup sizes to encourage larger purchases. The speaker also emphasizes the importance of word of mouth and referrals in acquiring customers, especially for low-cost consumer products. They advise on the use of promotions and incentives to collect customer contact information for future marketing efforts. The speaker concludes by encouraging the audience to subscribe, leave reviews, and share content to support their endeavors.

Keywords

💡Frozen Yogurt Stores

Frozen yogurt stores are businesses that specialize in selling frozen yogurt, a dessert that is a popular alternative to ice cream. In the video, the speaker discusses the financial aspects of running such a store, including average daily sales and the challenges of maintaining profitability. The script mentions that these stores typically make between $750,000 to $800,000 a year, but the actual take-home pay for the owner is much less due to various operational costs.

💡Entrepreneur

An entrepreneur is an individual who starts and runs their own business, often taking on financial risks in the hope of achieving financial success. The speaker in the video identifies as an entrepreneur and shares insights into the decision-making process of choosing between different business ideas, including a frozen yogurt store, a fitness business, and a test prep business.

💡Owner Pay

Owner pay refers to the income that the owner of a business receives after all business expenses have been paid. In the context of the video, the speaker discusses that the average owner pay for a frozen yogurt store is around $328 per day, which is significantly less than the total revenue due to the high costs of running the business.

💡Margins

Margins in business refer to the difference between the cost of a product and the selling price, often expressed as a percentage. The video mentions that frozen yogurt stores typically operate on margins between 10% and 15%, which is relatively low, indicating that a significant portion of the revenue goes towards covering costs.

💡Franchises

A franchise is a business model where a company (the franchisor) licenses its business model, brand, and intellectual property to another party (the franchisee). The video discusses the dynamics of franchises, particularly in the frozen yogurt industry, where the franchisor takes a significant percentage of the top line revenue, leaving the franchisee with a smaller profit margin.

💡Bulk Purchasing

Bulk purchasing refers to the act of buying large quantities of goods at a time to get a lower price per unit. The video explains that franchises can benefit from bulk purchasing due to their scale, which can save on the costs of items like yogurt, fruit, and equipment. However, it also notes that franchises may initially overcharge for these items to generate revenue.

💡Foreclosure Sites

Foreclosure sites are platforms where businesses that have failed and are being liquidated sell their assets. The speaker mentions using a foreclosure site to purchase gym equipment at a significantly reduced price. The video suggests that aspiring entrepreneurs can use these sites to acquire equipment and reduce startup costs for businesses like frozen yogurt stores.

💡Self-Serve

Self-serve in the context of the video refers to a business model where customers serve themselves, as is common in frozen yogurt stores. The video discusses how self-serve can influence customer behavior, such as filling larger cups with more yogurt, which can impact the store's profitability.

💡Psychological Pricing

Psychological pricing is a marketing strategy that uses pricing to influence a customer's perception of a product's value. The video gives an example of how frozen yogurt stores price their products by the ounce rather than by size, which can lead customers to feel more in control of their spending and potentially spend more.

💡Word of Mouth

Word of mouth refers to the act of one person telling another about a product, service, or experience without prompting from a company. The video emphasizes the importance of word of mouth as a cost-effective marketing strategy, especially for businesses with low ticket prices like frozen yogurt stores.

💡Default Options

Default options are the settings or choices that are selected by default in a given context. The video discusses how altering default options, such as removing smaller cup sizes, can influence customer behavior and increase sales. This strategy is used by some frozen yogurt stores to encourage customers to buy more yogurt.

Highlights

Frozen yogurt stores make an average of $750,000 to $800,000 a year.

The average store does over $2,000 in sales a day, with owner pay around $328 a day.

Owner run margins are typically between 10% and 15%.

The average Menchie's owner makes $93,000 a year in take-home pay.

Franchises often take about 6% of top-line revenue.

Franchises aim to optimize returns slightly above the stock market.

Franchises may structure fees to keep franchisees making just enough to continue but not get rich.

Bulk purchasing through franchises can save on hard costs like yogurt and supplies.

Franchises may initially overcharge for supplies to make money.

Foreclosure sites like rasmus.com can be a source for affordable second-hand equipment.

The average cup size is eight ounces, with a 25/75 split between toppings and yogurt.

Toppings cost between $0.10 to $0.40 per ounce, while yogurt costs about $0.08 per ounce.

Stores aim to have as much yogurt as possible in the cup due to higher margins.

The yogurt industry is poorly competed with little differentiation between brands.

A well-run store can out-compete others by simply being better than the bottom 25%.

Consumers feel more responsible for their spending when they control the amount they take.

Larger cup sizes can lead to increased sales without the consumer feeling overcharged.

The order of presentation in self-serve is often in reverse order of cost to the store.

High-performing stores focus on better service, cleanliness, more selection, and word of mouth.

Word of mouth and affiliations are the most profitable ways to acquire customers for low-cost items.

Startup costs can be reduced by purchasing from failed businesses at a fraction of the original price.

Promotions and partnerships with local organizations can be an effective marketing strategy.

Transcripts

frozen yogurt stores make twenty one

hundred dollars a day selling 500 cups

at eight ounces each and it was the

business that I almost started instead

of starting my gym so I know a ton about

it and I will tell you how it works and

what you can use from psychology that I

learned from yogurt stores that you can

apply to your business today when I was

21 years old I wanted to be an

entrepreneur and I was deciding between

which business I should start either a

test prep business because I'd done

really well on my standardized tests

Fitness because I was in shape I liked

Fitness people always talk to me about

it and the third was frozen yogurt I did

an extensive amount of research on how

to open a frozen yogurt store a couple

quick things that you may not know about

Frozen your stores in general they on

average make between 750 and 800 000 a

year I thought eight hundred thousand a

year that means I make 800 000 a year

I'm Gonna Be Rich doesn't really work

that way the average store that we're

talking about does 2 000 plus dollars a

day means 328 dollars a day in owner pay

they run margins between 10 and 15

percent the average Menchie's owner for

contacts makes ninety three thousand

dollars a year take home not as sexy as

you might think you've got strawberries

that are going bad you've got machines

that are breaking in the back you've got

hard cost of yogurt you've got a retail

lease that's prominently located with

good signage Good Foot traffic ample

parking like there's lots of other

things that go into this business and on

top of that if you wanted to buy into a

franchise most franchises have six

percent ish of top line that goes

straight to them now that might not

sound like much but if you're running 10

margins that's 60 percent of your take

home

so they have figured out a way to take

the majority of the profit from their

franchisees and what most people don't

know is that franchises will structure

their fees so you make just enough that

you can keep going and maybe if you're a

good operator open another location but

not so much that you're going to get

rich on it so they're only looking to

optimize to beat the return on capital

of the stock market by a decent amount

if the stock market gets you 10 they're

going to try and get 20 to 25 and

they're going to squeeze off the top and

take the rest because of how good their

model is the flip side of that is that

if you are into a franchise you should

be saving enough on bulk purchasing

because they're buying for 200 plus

locations that they can save you on hard

costs of things like yogurt fruit spoons

cups machines Etc the converse of that

though is that many times when you're

starting the franchise they will up

charge you on all of those things

because they're trying to make money too

there's the theory and then there's the

practicality because I went on a site

called rasmus.com it's a business

foreclosure site I got my first gym

equipment from that foreclosure site 13

Grand I sat there and I'd refresh every

week until eventually one came up and I

bought it all the gym equipment from a

gym that went under a franchise won't

let you do that because that's where

they make their money but there are ways

to open these things for cheaper I did a

cursory search on there before this

video and there were three frozen yogurt

stores that were franchises that went

under in terms of I could buy everything

inside the store the most expensive the

three was 20 grand you're trying to get

into this world you want to go open a

restaurant you want to open a gym go

find foreclosure sites now you may have

heard of some of these places Golden

Spoon Yogurtland Menchie's Pinkberry if

you search frozen yogurt store near you

you probably have 30 locations that open

up because there's demand for it the

average cup size is eight ounces that

people will buy the average split

between toppings and yogurt 25 of

people's weight is topping 75 is yogurt

it's best for the store owner to have as

much yogurt as possible in the cup

because the toppings are more expensive

so toppings cost between 10 and 40 cents

per ounce most places charge between 20

5 and 60 an ounce they can even break

even or lose money depending on which

toppings you're getting you get the

fruit it's costing them money but they

make up for it in the fact that yogurt

costs them about eight cents per ounce

and they charge 50 even 60 sometimes

that's where the margin of the business

exists when you're working on margins

that are even like 70 that means that

you have 70 left to cover everything out

so if you want to run a 50 margin

business for example then you'd have to

take 20 of your top line and pay every

other Bill very hard to do for that

twenty one hundred dollars a day they're

selling roughly 500 cups a day of yogurt

on average with an eight ounce cup of

all those brands most of them are

commoditized meaning there's very little

difference between a Menchie's and a

yogurt land and a Golden Spoon it's been

a poorly competed Marketplace solely

done by franchisors who are trying to

sell as many locations as they possibly

could rather than build a brand there is

no Chick-fil-A of the yogurt world

because if there were they'd be

dominating the underlying lesson is that

if you look at any Indus history there

is the potential to have an amazing

business inside of it even if it is a

commodity today you can out-compete them

all you have to do is walk into any

Yogurt Land and see that the floors are

sticky the chairs are all over the place

the cups are a mess sample cups are

strewn on the side the girl behind the

counter is on her iPhone when you walk

in doesn't say hello one of the nozzles

is out it says out of order everywhere

it doesn't take a lot to win most times

just to beat everybody you got to be

better than the bottom 25 and you make

money one of my favorite things that I

learned from one of the big

breakthroughs that I think they had was

actually how they priced ice cream is

usually sold by cup you get a small you

get a medium you get a large they flip

that and made it wait the consumer gets

to pick how much they spend someone

might fill up a cup get to the counter

and see seven dollars and be like ah I'm

such a fat ass rather than when you buy

one off itself and then you see the

seven dollars you're like wow this place

is so expensive because there's an

element of control on the consumer side

they are the ones you to Bear some of

the accountability or responsibility for

that fact the second thing that they did

that I thought was brilliant they used

to have small normal sized cups at

yogurtlands someone I will bet you a few

years ago ran out of small cups

and then people only had the medium and

large cups left and they realized that

at the end of the day their sales

probably went up by 20 or 30 percent and

they wondered I wonder why our sales

went up when you give people a bigger

cup they will fill more of it they're

like oh I guess this is standard the

power of the default option when selling

anything that's why assumed closes and

things like that are so powerful when

you say hey do you want this or this you

can even listen for this at fast food

places they're like hey do you want a

medium or a large coat they have a small

option but they want you to pick between

the larger ones Yogurtland and those

ones went a step further just remove the

small option because it is self-serve

but if you got a small amount of yogurt

in a bucket-sized cup it just looks

weird they did that and by extension

were able to raise the amount of yogurt

that people bought probably by a large

percentage every single time and not

take the blame for it because they're

the one with the hand on the nozzle

you'll also note that the order in which

they present the items are reverse order

of the cost to them so they start you

with the cheapest option this is exactly

how buffets work too they want you it

fill up on the salad and then they put

the seafood all the way at the end

because they want people to fill their

plates before they get the most

expensive item they'll attract you with

the expensive thing but they'll put it

at the end of your self-service line you

have the yogurt which is the highest

margin first and then you'll have your

dry items that don't go bad crumpled

Oreos things like that and then you have

the fresh fruit that goes bad that costs

more money by ounce and so they get

people to fill up their cup in the

beginning with the highest margin then

they sprinkle on a little bit of

slightly lower margin and then when you

have almost no room left then you put

your few fruit on top if you get a pound

of strawberries it's like 10 bucks

you put that pound on the machine ounces

there cost you 60 cents they'd be pretty

much breaking even on that corporate

noted that the number one way that they

are able to get more customers and the

highest performing stores did so with

better service cleaner stores more

selection and the most important one

word of mouth when you have an average

ticket that's so low like yogurt cups

and you have margin even on that tiny

little cup the only profitable way to

really acquire customers is either word

of mouth or Affiliates meaning other

businesses that send you business they

double down on that now when they

started years ago Google search was

cheap enough that they could actually

drive pay-per-click campaigns to get

people to their locations but nowadays

it's too expensive for most of them so

they almost all have to rely on the

quality of the product and the

experience the way that I was going to

open my store was that I wanted to

create a better experience for somebody

walked in I wanted to have

floor-to-ceiling kind of candy

see-through experiences and when someone

walked in they were overwhelmed and they

would just turn turn the nozzle on there

which by the way I would have it so

they'd be really clunky so too much

would fall through so I get a little bit

more water on it and I always felt like

that you should have more selection

people eat more the more options you

give them then my promotional effort my

plan was to go to the university so I

wanted to be close to colleges and then

I was going to partner with all of the

fraternities and sororities and have

competitions between them to see who

could get the most yogurt and then give

some sort of Swag or something for the

fraternity or whatever that got the most

yogurt during that period of time I

could rinse and repeat that process with

companies I could rinse and repeat that

process with affiliations and that is

the cheapest form of advertising when

you don't have a lot of money is going

to find places where there's buckets of

people that you can give them some sort

of promotion to bring them in I'd run

the competitions to bring them in I'd

have a crazy incentive to get the text

number like hey do you want to save 50

today by joining your text list I just

acquired a lead that I can get lifetime

value on for two dollars

I'll take it because I know that I'm

going to be able to get them back or get

them to bring a friend and I want to be

able to remind them of my store on a

regular basis so if you're looking at

stuff that you can model from the yogurt

businesses and also not do that they're

doing poorly number one when you have

the option to give a customer the

ability to pick their own pricing by

usage do it oftentimes people will blame

themselves not you when they overuse or

overspend think about minutes back in

the day or text messages number two you

want the most people to see the thing

that makes you the most money first we

want to use up as much of their spending

power on the things that make us the

most profit number three if you have a

type of product or service where someone

can sample multiple things the more

things you offer them the more things

that they will ultimately buy and

consume number four if you are starting

a business unless it's something brand

new and completely radical there's

likely somebody who started a business

just like yours who failed and you can

oftentimes buy all their stuff for 10

cents or five cents on the dollar and

and dramatically decrease your startup

cost if you can get a decent amount of

actual equipment for that amount of

money when you go to the right seller

and that is a motivated seller number

five the power of the default option the

fact that they went from removing the

tiny cups to only giving large and

bucket sized cups for yogurt encourage

people to use more yogurt themselves and

they do that because it looks silly in

comparison six when you're trying to

promote something that costs very little

money especially consumer products it's

very difficult to acquire customers with

paid advertising profitably that's why a

lot of these places raise funding if you

don't have tons of cash and you're not

funded then the two most profitable

strategies for acquiring customers you

get Word of Mouth which is referrals

it's not just having a very good product

which is important but reminding and

encouraging people to share it my

podcast I just decided to say hey guys

if you could leave a review and share

this with somebody that would be great

as soon as we did that we 20xed the

number of reviews that we were getting

and our growth skyrocketed just because

I asked by the way click subscribe and

notification Bell and all those things

and share those fantastic