Considering Opening A Frozen Yogurt Retail Store?
Thinking To Add Frozen Yogurt To Your Current Business?
Frozen yogurt shops are one of the hottest retail store concepts around in Malaysia many years back. Rasa Royal’s Frozen Yogurt can help refine your concept with low investment cost and high margins. No need to pay high franchise fees. Give yourself the best chance at success by running the numbers and understanding some business basics first.
Check out the profit calculator for a customized analysis for your concept.
There are several key drivers for making a profit with a frozen yogurt store. It is important to emphasize profit versus sales. You may have great margins but if your customer base is too small, your sales won’t be enough to drive those high margins to success and profit. You should think of these profit drivers as dials or levers – you can adjust the dials various ways to maximize profit.
Key Profit Drivers
- Volume (the number of customers per day and the number of unit yogurt sold)
- Price per gram / cone / cup per unit
- Sales of additional items (toppings? fresh fruits? Nuts?)
- Labor Costs
- Rental & Utilities
- Depreciation of Machinery
- Product Costs (don’t forget to include the cost of free samples)
- Supplies (cups, spoons, napkins, etc.)
- Online Marketing & Advertising
- Store and equipment maintenance
- Depreciation Cost
Turning the Dials
INCREASE SALES REVENUE
- Get more customers. Typically this will mean more costs (like advertising and marketing), but you can also be creative and find traffic generating ideas with no or little cost. Another way to drive more traffic is to improve your product by offering new or unique flavors and by creating a unique product compared to your competitors. Rasa Royal’s products are ideally suited for this – contact us to discuss further.
- Increase the price. You can increase price and often not affect sales volume, but this is tricky because there is an elusive price Tipping Point. When you cross it your volume will actually decrease because either customers will stop coming or they will buy less. This Tipping Point is unique to every area and every store. One approach is to keep your base price per unit high but then use discounts and promotions to give customers a lower effective price. Remember that it is much easier to lower your price than it is to raise it.
When evaluating costs there are Fixed Costs and Variable Costs. Fixed Costs are costs that are the same regardless of how many customers you serve. For example, your rental cost will be the same whether you serve 10 customers or 300.
Rental is a fixed cost. On the other hand, cups are a variable cost because you only incur costs for each customer.
- One of the largest single costs for your store will be rental. There are a couple strategies to take when deciding on a location. For the purposes of simplicity, we’ll break it down into two strategies at opposite ends of the spectrum, even though in reality there are various strategies in between these two.
High Rent / High Volume. If the location is high rental it needs to also be a high traffic area to drive your sales volume. High rental areas may also allow you to charge more per unit sold. In order for this strategy to work, you must have a large number of customers. Shopping Mall is a good example. Especially for some regional mall in malaysia, Pavillion KLCC, 1Utama, Sunway Pyramid, IOI City Mall, Mid Valley, The Garden. A kiosk for 200sqft will cost you around RM13,000-RM15,000 for a prime location. You will need to have a good marketing team to grab extra traffic to reach your doorstep.
Low Rent / Low Volume / Low Cost. If the location is a very low rental property (B Grade Malls or Shoplot Unit ) that means it’s probably off the beaten path and doesn’t have as much natural traffic. Generally, this would result in less traffic and lower sales volume, although there are stores that are in horrible locations and still gain a “cult following” and have lots of traffic. A low rental location may also mean you need to charge less per unit sold, lowering your sales revenue. In order for this strategy to work you have to keep your costs extremely low and find ways to generate traffic in spite of your location.
- Labor cost will most likely be your single highest cost. Especially brand that need to sustain in Big Malls. The big question here is whether or not you can run your store with just one employee. Our profit model shows that unless your store has strong volume (150 customers per day or more), you could lose money having two employees staff your shop. Of Course there are other factors to consider, like employee safety and or employee fraud.
- Product Costs.This is also a tricky area, because your entire concept is based on your frozen yogurt mix. If your product isn’t good, you won’t succeed. But at the same time, you want to keep those profit margins robust. Rasa Royal’s solves this issue with mixes that are high-quality and available to you at a very competitive wholesale price.
- Most likely, the customers will demand free samples, but at the very least you should understand how many free samples you are giving away and how it is affecting your costs. One option is to have the sample cups behind the counter so the customer has to request one from an employee. Studies show that when shoppers make eye contact with a store employee they are less likely to steal something – I’d like to think this principle holds true for abusing the free samples as well.
The general belief in the business world is that you need two or three food retail shops to be able to do it full-time and quit your regular full-time job and work for yourself. Depending on your available capital, you may want to consider opening 2 or 3 shops at the same time. This will also give you immediate brand relevance and can often protect your area from incoming competitors.