This is Sweet; Forever Yogurt Feeds a Fad that Just Won’t End: Self-Serve Frozen Yogurt

(c) 2012 Crain Communications, Inc. All rights reserved.

Truth be told, Forever Yogurt co-founders Mandy Calara and Ahmad Yilmaz don’t even like frozen yogurt all that much. Luckily for them, a lot of Chicagoans—and investors—do.

Forever Yogurt, which has six Chicago-area locations, one in Madison, Wis., a seasonal trailer at North Avenue Beach and a Chicago food truck, plans to open 32 more stores throughout the country in the next four months. The company also has signed a 20-store franchise agreement to bring Forever Yogurt to Pakistan and is in advanced talks with a private-equity firm to raise $6 million and expand even further, both domestically and in China.

For skeptics who have watched frozen yogurt shops proliferate across the city, often within sight of competitors, Forever Yogurt’s expansion seems to defy logic. A brief spin through Yelp.com yields at least 24 similarly named purveyors, from Berrymoon to ZBerry, that serve nearly identical flavors and toppings in generically bright, modern stores. Mr. Yilmaz, Forever Yogurt’s chief brand officer, says the company has at least 20 competitors.

But the probiotic-tinged craze, which started in 2007, is still trending upward. For the year ended in September, 138 million servings of frozen yogurt were ordered at food-service outlets, up 12 percent from last year, which was up 8 percent from 2010, according to NPD Group, a market research company in Port Washington, N.Y.

Some of those sales are coming at the expense of ice cream, says Darren Tristano, an executive vice president at Technomic Inc., a Chicago-based food industry consultancy. Frozen yogurt sales are at roughly $1 billion in the overall $6 billion frozen-dessert market, he says.

“The marriage between the health benefits of frozen yogurt—one-third less fat, lower sugar, active cultures—and the experience of self-serve created this mushroom cloud,” says Tom Vogel, director of sales at YoCream, a Portland, Ore.-based manufacturer of yogurt used by many chains.

FIRST IN SELF-SERVE

Though tart frozen yogurts from chains like Dallas-based Red Mango already were established in Chicago, Messrs. Calara, 36, and Yilmaz, 29, were the first to allow customers to control the amount of their serving. The result? At least one customer who shelled out $14 for a cup that weighed almost 2 pounds.

Mr. Calara, the company’s franchise CEO, says he plans to open 50 corporate locations and 250 franchises nationally over the next three years. Because there’s so much competition in the frozen yogurt and ice cream industry, Mr. Calara acknowledges that Forever Yogurt has to move quickly. He also hopes to persuade struggling mom-and-pop ice cream shops to convert to Forever Yogurt franchises and unify the fragmented market.

So far, the money is good. Each store, he says, costs about $300,000 to build out, including about $100,000 to install the seven yogurt machines that allow people to serve themselves. But each pulls in $500,000 to $1 million annually, according to Mr. Calara. After doubling its locations and revenue in each of the past two years, Forever Yogurt raked in more than $4 million in 2012 and employs 89 mostly part-time workers. Mr. Calara projects $19 million in revenue next year.

Messrs. Calara and Yilmaz met through mutual friends seven years ago. Mr. Calara was a University of Illinois at Chicago alum and a former professional poker player; Mr. Yilmaz was a political science graduate student at the University of Chicago who had a passion for graphic design.

In 2007, they launched WhosOut.com, a social networking site that encouraged people to sign in to nightlife spots so users could see a location’s male/female ratio before arriving. Though checking in online has become almost instinctive today, the idea hadn’t gained traction five years ago. “I think we had seven or eight users and $49 in revenue” in less than a year in business, Mr. Calara says half-jokingly.

They encountered the self-serve frozen yogurt phenomenon in Scottsdale, Ariz., where they had a vacation rental business. They set up their first shop on North Avenue in Bucktown in 2010.

Mr. Tristano says frozen yogurt will continue to grow for at least a few more years. That’s not forever, of course, but it’s long enough to build a good-size chain.

Crain Communications, Inc.

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