Ice Cream and Frozen Desserts in the U.S.: Markets and Opportunities in Retail and Foodservice

The U.S. market for ice cream and related frozen desserts neared $25 billion in 2009, with sales growth from previous years slowed somewhat by the recessionary economy. Manufacturers of retail frozen desserts and operators in the frozen dessert foodservice industry (which accounts for better than half of total category sales) adjusted their prices in order (or held the price line and reduced package sizes) to keep consumers screaming for ice cream instead of about how much it cost. Price controls and price-based promotions are likely to stay in effect as the economy slowly rebounds. So, too are cost-saving trends like the consolidation of companies and brands, as in the case of Hood and Brighams, and industry production and administrative facilities, as practiced most notably by Unilever.

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About Ice Cream Shop Business Plans,Licenses,and More

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Gelato Ice Cream Trends

Trends

When it comes to gelato, the flavors that can be created are truly limitless. Keeping flavors new and fresh to maintain interest is key for longevity and success in the gelateria. Gelato makers around the world continuously research and develop new flavor profiles to entertain those with the most basic to the most refined palate. Every year offers up something different and the food trends that emerge can play a big part in flavor development.  From veggies, herbs and oils to spices and exotic fruits, gelato flavors can truly create a stir.  While traditional flavors represent a large part of sales because they capture a larger target audience, there is always someone out there looking for something exciting and that’s where creating new flavors is imperative.

Creating modern flavor trends usually falls into a few categories that ultimately define the wide-range of intriguing flavors each year.

Culture

1. 
   

   Heritage & Tradition Impact Desired Flavors

   While gelato has a long tradition in Italian culture, each country’s culture impacts the development of new and modern gelato flavors. Gelato makers who don’t adapt to their cultural surroundings can face financial hardship because they are not supplying the demand properly. Modern flavors recognized around the world include: • Dulce de Leche or Caramellatte (South America) • Green Tea (Asia) • Rice (Asia) • Red Bean (Japan) • Torrone (Italy) • Spekulatius (Germany/Netherlands) • Tiramisu (Italy) Americanized Gelato as an Example:Ice cream is a billion dollar industry in the U.S., and while chocolate and vanilla remain at the top as most craved for flavors, it’s the newest concoctions stemming from the big ice cream companies that keep American wanting more. The same can be said for gelato. To stay up on the market, American gelato makers have incorporated modern mainstream flavors such as: • Cake Batter • Cookie Dough • Peanut Butter Cup • Rocky Road

Hybrid Flavor Creations

1. 
   

   Sometimes Two Taste Better Than One

   Two is twice as nice! In Italy, gelato is generally served with two flavor combinations side-by-side; however gelato makers are taking it one step further by creating hybrid flavors. Research has found that many flavors complement each other well when mixed together and create a new, intense flavor profile. The list of different hybrid creations can go on and on, but some of the favorites include: • Praline Hazelnut • Banana Caramel • Raspberry Chocolate • Strawberry and Cream • Strawberry Banana • Chocolate Peanut • Cinnamon Hazelnut • Chocolate Cappuccino • Banana Walnut • Chocolate Cherry • Peach Mango • Mint Chocolate

Infusing Alcohol

1. 
   

   Adding a Little Kick

   Frozen desserts and alcoholic beverages have always played well together. Gelato flavors created with or enhanced with alcohol creates a product that arouses the sophisticated palate. Gelato flavors made with spirits includes: • Merlot • Peach Champagne • Pina Colada • Strawberry Cabernet • Bailey’s Irish Cream • Malaga (Rum & Raisin) • Crème a l’Orange Cointreau

Local Markets

1. 
   

   Freshly Grown Local Produce & Gelato

   The agricultural and geographical landscape of an area can play a tremendous part in determining the flavor of foods preferred by consumers. Locally grown fruits and vegetables, seasonal offerings and availability all contribute to the uniqueness of each gelato maker’s flavors. This is even the case for some traditional flavors as well, as they can vary by country and market. What can be considered a virtually unknown flavor here in the U.S., can turn out to be a prominent flavor somewhere else. Some flavors that are exotic to the U.S. or certain U.S. regions, but recognized in other parts of the country and world are: • Tres Leche • Pomegranate • Pear • Pumpkin (seasonal) • Guava • Passion Fruit • Papaya

Meal Replacement & Savory

1. 
   

   Yes, Gelato For Dinner

   Many can recall the “three-course chewing gum” that leads to the fall of Charlie and the Chocolate Factory’s Violet Beauregard. If you don’t, the short version of the story is that a new gum was invented that offered up a whole meal just by chewing it, everything from soup to roast beef, and blueberry pie. However the gum was not thoroughly tested and the greediness of young Violet, who grabbed the gum without permission, caught up to her and on the last course of blueberry pie, she turned into a blueberry. The movie and “three-course” gum touched on the popular topic of meal replacement. Because of the nutritious properties of gelato, it has often been considered a meal replacement. With that said, gelato makers have been experimenting to offer gelato flavors that can be served at any meal, or complement an existing recipe. Popular flavors include: • Basil and tomato • Olive oil and parmesan cheese • Balsamic • Chocolate chili

Sky’s the Limit

1. 
   

   Never a Shortage of Gelato Flavors

   The final category is really the miscellaneous flavor that doesn’t fit in any of the other categories or just represents standard flavors that are more modern than the traditional ones. As the category header states, for the gelato maker the sky’s the limit. It just takes creativity, passion and a desire to try new things to develop a great modern flavor. Some modern flavors worth trying: • Cheesecake (Quarcream) • Pink Grapefruit • Bubble Gum • Cotton Candy • Coffee • Coconut • Watermelon • Kiwi

What modern flavors have you tried? Inspired to try something new?

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The Players – Your Options Opening a Frozen Yogurt Store: Franchise, Licensing, Straight Purchase

The Players

• 3 Options – Franchises, Licensing deals or Straight Purchase with no strings attached.

Franchises:

Legal Disclaimer: This information is not a franchise offering for any of the companies listed below and should not be construed as such. We have gathered this data independently and do not guarantee nor assume liability for incorrect data. We recommend that if anyone is seriously interested in pursuing any of these franchise opportunities, that they review that franchise’s Federal Disclosure Document (FDD) with an attorney and accountant.

The franchise route – Is it the safest bet?  Maybe, but definitely the most expensive.

Who’s out there?

Menchie’s

100% Self Serve Concept

Maybe the cream of the crop. Great floor designs – worth looking at in person to see what they are doing. Great fresh fruit topping bars, great looking candy topping displays.

Total Investment: $340,000-$400,000
Initial Franchise Fee: $40,000

Royalty Fee: Not available (we believe it is around 6%)
Advertising Fee: Not available

Franchise Units

Red Mango

Primarily Full Serve Concept, moving toward Self Serve Concept

Total Investment: $264,500-$435,000
Initial Franchise Fee: $25,000-$35,000
Royalty Fee: 6%
Advertising Fee: up to 4%
Term of Agreement: 10 years

Franchise Units

Yogurtland

Self Serve Concept

Total Investment: $350,000-$400,000
Initial Franchise Fee: $35,000
Royalty Fee: 6%
Marketing Fee: up to 2%
Term of Agreement: 10 years

Franchise Units

Freshberry – Self Serve

Total investment: $165,750 – $386,200
Franchise fee: $25,000
Ongoing royalty fee: 6%
Term of agreement: Term of agreement not renewable

Franchise Units

Orange Leaf –

100% Self Serve Concept

A solid player, with a relatively small initial franchise fee.

Total Investment: $210,000-$356,500
Initial Franchise Fee: $12,000
Royalty Fee: Not available
Advertising Fee: Not available

Pinkberry

Arguably the most established successful franchise.

Primarily Full Serve Concept, moving toward Self Serve Concept

Seems to have much more stringent requirements, starting with:

Minimum Liquidity: $400,000 ($200,000 per store)
Minimum Net Worth: $800,000 ($400,000 per store)

Total Investment per store: $300 – $450,000 per store
Initial Franchise Fee: $45,000
Royalty Fee: 6%
Advertising Fee: 2% local +2%Nat’l

Licensing

This is “almost” a franchise deal, but with more flexibility. You basically buy a name brand and the concepts.

Tuttifrutti for example, charges a $25,000 fee and zero ongoing royalties. For this, you get to use their name, the designs, marketing tools, etc. They also help you with machines, layouts, etc.

This is an attractive concept, but you are limited in your territory and have to shell out cash for every store you open. In other words, you pay $25k and they help you get the first store open. If you want to open a second store, that fee might be $20k, then $18k for the 3^rd store and so on.

Like the franchise concept, it is comforting to have a group behind you with the “know-how” to get you started without having to reinvent the wheel.

But don’t be misled. You will need your own architect, contractor, etc. TuttiFrutti will simply help you determine what a good location is, and act as consultants. The key services that architects and contractors provide are out of your pocket in addition to the $25k licensing fee.

In summary, this seems like a pretty good deal, but beware. Make sure you know what kind of pricing you are going to pay for the product mix, etc.

STRAIGHT PURCHASE:

(True Independence) – No money down, no royalties

Going forward as an independent is one of the most attractive choices. After all, how hard can it be? Do you really want to be fully committed to any type of contract that limits your territory, creativity and makes you sign an iron clad contract that seems to protect everyone but you? That sounds harsh, but you really need to watch what you sign when you go any other way than as an independent.

There are suppliers out there who will sell you frozen yogurt liquid mix or powder. The liquid mix is the easiest to deal with. Simply pour the mix into the hopper and that’s it. The machine does the rest.

Dreyer’s/Edy’s, Honey Hill Farms, Yocream and others are out there.

I personally believe that Dreyer’s/Edy’s is  the best choice if you are going to go in this direction.

Why is Dreyer’s/Edy’s frozen yogurt mix a great choice?

1) Zero fees

2) Dreyer’s/Edy’s offers marketing materials that are beyond what others will provide. This option gives you the best chance to replicate what the franchises are doing.

3) You can buy the mix and choose to use the Dreyer’s or Edy’s name or choose to create your own brand and call it whatever you want with no strings attached.

4) National distribution is also key. If you don’t have easy acess to the product you choose to go with, count on paying more to ship it to your location in large quantities. This makes it harder to manage inventories, ordering, etc. Dreyer’s/Edy’s has a various distribution alternatives across all markets nationwide. And the pricing is aggressive in comparison to others we’ve seen.

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Frozen Yogurt Product Cost and Suggested Selling Prices

Product Cost and Suggested Selling Prices

Liquid vs. Powder Mixes

Advantages of Powder:

• Dry Storage – No need for storage equipment that requires electricity

• Theoretically easier to source – no need for supplier to have frozen distribution capabilities

Disadvantages of Powder:

• Might be more expensive than buying frozen liquid mix

• You need more ingredients – skim milk, filtered water

• Takes longer – need to mix it – about 15-20 minutes per batch
• Labor intensive – employee needs to mix

• Consistency can be a problem. If mixed by different employees, they might make each make it slightly a different tasting product.

How does the powder product work?

• In short, employee uses approximately one pound of dry mix, corresponding amount of flavoring mix, 2 gallons of skim milk and ¾ gallon of filtered water. Put all this in a food grade plastic 5 gallon bucket and mix with a free standing motorized mixer.
• The above will yield approximately 3 gallons of product, which is the appropriate size hopper for a typical self serve shop.

LIQUID MIXES

Advantages of liquid (frozen, then defrosted) mix:

• Less labor necessary – just pour mix into machine
• More consistent – pre-mix at factory means you don’t have to worry about flavor variations
• Less materials – no need to source skim milk on a regular basis or worry about filtered water sourcing
• Possibly less costly than using powder

Disadvantages of Liquid Mix

• Need freezer and refrigerated stored to manage inventory

Topping Costs – (the million dollar question!)

Fruit, candy, etc.

The toppings will definitely cost you more than the yogurt. A range is between .10 and .40 cents per ounce – so be very careful in what toppings you choose to offer, since your retail price per ounce is fixed between 35 and 50 cents per ounce.

The other “wild card” or “million dollar question” is what the ratio of yogurt to toppings is for the typical customer. In other words, if you’re paying 7 cents an ounce for the yogurt and 20 cents an ounce for the topping, you will be a lot more profitable if the customer goes mostly with yogurt. The good news is that they do. A typical breakdown of yogurt/topping is 75% yogurt 25% topping.

After you’ve been open for a month, you will have a much clearer picture of your ratio. Upon further analysis, you can decide if you need to raise the per ounce retail price a few pennies.

Where to buy toppings? Costco, Sams, Restaurant Depot, Target, Walmart, Grocery store, etc. Basically, find somewhere that is convenient to buy from on a daily basis and sells candy and fresh fruit at the low prices.

• Average serving sizes
• Typical ring is 8 ounces. At .45 per ounce = $3.60

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Opening a Frozen Yogurt Store: The Financials – The Typical Overhead Expenses

FINANCIALS

Please understand that these figures are designed primarily to give you something of a framework for which to work from, but are in no way a specific example of what you will make from the venture.

Overhead Examples

• Labor Costs – These are really tough to nail down and are subject to a wide range of factors. For the purposes of this guide, figure anywhere from $7,500 to $15k per month in labor. About $7,300  a month for an average store doing about $350,000 a year. A good rule of thumb for labor is about 25-30% of sales.
• Figure 3 total employees at one time in store, store open 70 hours a week. This can be trimmed down if sales are really weak on certain days or times.

Breakdown:

One employee working register, one manning machine back room and keeping toppings full, one on floor as “info” person, keeping machines, floor and tables clean. Floor employee explains process to new customers, controls customer “over sampling” and generally keeps things running smoothly. Reduced to 2 employees during slower hours of the day or slower day of the week.

Figure you need 3 employees on the floor for 6 of the 10 hours per day. Figure 2 employees for the other 4 of the 10 hours.

Total man hours per day as noted below:

3 employees for 6 hours = 18 hours

2 employees for 4 hours = 8 hours

26 hours at a blended hourly rate of $12/hr = $312 per day or $2184 per week.

Possible pay breakout below*:

• Manager (@$15/hr)
• Supervisor (@$12/hr)
• Full time customer servers (@10/hr)
• Part timers (@ $9/hr)

*estimates – not a perfect science. Per hour pay includes FICA costs

A first year profit and loss statement could potentially look like this (basic model):

These are all very rough numbers, but to do $1000 in a 10 hour day, you would need to sell 2,200 ounces, at $.45 per ounce. At an average of 8 ounces per customer, you would need about 275 customers, or about 27 customers per hour. Again, these are rough numbers and can be tweaked by adding more hours to the day, etc.

Keep in mind that as an owner/operator, your net pay would be higher since you would be paying yourself the manager salary as well as the profit.

We’ve heard that there are stores out there doing $500k, $750k and up to 1 million per year. We chose to use $350,000 as an example to keep it as real as possible. The stores doing the bigger numbers are paying more rent and labor and are in very high traffic, more affluent locations.

• Rent/Location
• All over the place of course. Dependent on a ton of different factors. Can range from $10 a sq ft. to $50 a sq ft.
• Typical space requires a minimum of 600 sq ft. maximum of 2000 sq ft. Average store about 1200 sq ft.
• If a store is 1000 sq ft at $30/sq ft, then the monthly rent is $1000 X $30 = $30,000 divide by 12 months = $2500/mo

• Utilities – Again, tough to say because it depends on how many machines, etc. But an average store’s power bill will run around $1,000.
• An average store will need a 300 amp panel

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Key Equipment Needed When Opening a Frozen Yogurt Store

Key Equipment

Machinery – What Works Best?

A little bit about soft serve machines. Some of what I mention here will be obvious to many of you, but I’m writing this book with the thought that you have no idea at all about the equipment or the soft serve business.

First off, soft serve is simply a type of frozen desert that hasn’t been hardened.

When looking for a machine, one of the first things you have to consider is the machines capacity.

Capacity is almost always measured by how many servings per minute the machine yields. High volume machines can generally yield 7 four ounce servings per minute. This is ideal if you have one machine at a concession where there is a long line and the machine is constantly being hit hard. It has to “recover” quickly. Medium volume machines yield about 4 four ounce servings and low volume machines yield about 1 to 2 four ounce servings per minute.

For self serve operations with multiple machines, you don’t need high volume machines. Medium volume machines are perfect for a self serve frozen yogurt store. It doesn’t make sense to go with high capacity/volume machines because these require more power and will increase your overhead unnecessarily.

Soft serve machines store “mix” in the “hopper”. The mix then goes into the barrel to be frozen, and churned by a “dasher”.

Key features on the newer machines that are critically important include “low mix alarms”.  If the barrel isn’t full, the mix might freeze solid and this will keep the dasher from turning. A frozen barrel can cause the dasher bars to bend or worse, damage the compressor.

The low mix alarm will shut down the compressor automatically if someone doesn’t respond to the low mix alarm. It will re-start periodically, but will keep shutting down until someone adds mix to the machine.

Water cooled vs. Air Cooled. If you have good ventilation, you can go air cooled. If ventilation is an issue, water cooled is a better option. If you have more than 6 machines, there is a water cooled option called a “glycol system” which might be a good option. It’s not cheap at about $15k, but it protects the machines and keeps your air conditioner from working overtime.

Maintenance:

Cleaning and sanitizing on a daily basis is never a bad idea being that you are dealing with a dairy product. Your local health inspector will tell you what the requirements are for your area.

Some machines have auto-cleaning modes that make it easier for your employees to clean the machines. That said, even with this feature, the machines need to be broken down to clean and sanitize parts that don’t get cleaned automatically.  You also have to make sure that the parts that need it are lubricated as often as recommended.

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Choosing a Location for your Frozen Yogurt Shop

Location

• What works, what doesn’t – You want a place that is comfortable. Easy to get in, plenty of parking. A place you can see a family sitting and relaxing with their frozen yogurt treat.
• Visibility is important
• Other eateries nearby are great to have. People finish their food and head over to the close by yogurt shop
• Malls are good, but not always. Need to make sure that the mall is open during peak yogurt hours, which can go into the night
• Outdoor seating is a great plus
• Typical

BIGGEST MISTAKES PEOPLE MAKE:

• Improper ventilation of machines – they will “under-perform” and die an early death
• “Too Much Machine” – People think that buying the biggest, most expensive machine is the way to go. It’s not. You can buy too much machine and suffer a utilities bill that is more than it needs to be.
• Improper machine settings – yield crappy texture and taste. Not a good thing. You need to know how to set the machines to yield the product you want, and you need to keep controlling quality on a regular basis.
• Bad location – speaks for itself
• Not throwing away cut fruit that sits in pans too long. I see this often. A manager trying to control food costs keeps cut strawberries or whatever fruit in the pan so long that it looks like mush. These should be thrown away long before. In fact, they should be tossed if they don’t look SUPER fresh. Nothing will turn a customer off more than mushy fruit. In fact, a key to this business is exciting the customer’s senses with fruit that looks fit to be photographed and put on the cover of Bon Appetite.

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Starting an Ice Cream Shop

Ice Cream Business Guide

Introduction

Starting any new business on your own can be stressful and frightening.  In this book, we will try to teach you the basics on how to choose an ice cream vendor, negotiate your lease, hire employees, and market the business.  Step 1 is…..don’t panic. You have a lot of information to go through and it will take time. You won’t necessarily understand everything, and not everything will make sense to you right away. If some of the business terms are foreign to you, don’t worry. You will learn little by little.

At the end of the day, the most important thing is your drive to succeed. If you are a people person, you will take good care of your customers and the business part will take care of itself….one step at a time.

Why should you choose the ice cream business?  It is said that 90% of Americans love to eat ice cream.  With that in mind why not choose a business whose product is loved and enjoyed by so many people?

In general, ice cream is a mixture of cream and milk, sweeteners, flavoring and air.  As it freezes air is beaten into the milk making the final product light and easy to eat with a spoon.  There are other ingredients such as eggs used in rich French ice creams and emulsifiers and stabilizers that are added to many commercial ice creams to help keep ice crystals from forming.  Quality, freshness of ingredients and the amount of air that is whipped into the product are factors that separate the best from the rest in the world of ice cream.  Dried milk products and a lower percentage of milk fats (butter fats) are usually seen in economy ice creams.  The higher quality ice creams are denser and less airy.  Fresh products are used in premium ice cream plus they contain up to 20% milk fat and include minimal additives.  The less air the higher the quality. If it doesn’t have at least 10% Butterfat or has more than 50% air, it has to be labeled “frozen dairy dessert”. Some of the major national ice cream manufacturers have product on the shelf that has a lot of candy chunks in it and because this adds cost, they either reduce the butter fat or add air in order to lower the cost. If you look closely, some of them are labeled “frozen dairy dessert” because they are more than 50% air.

The three segments in commercial ice cream are super premium (Ben & Jerry’s and Haagen-Dazs, premium (Dreyer’s, Edy’s and Breyer’s) and economy (supermarket Private Brand).  You should at least strive to sell premium ice cream in your ice cream parlor.  Customers can taste the difference and they expect something more that the local dairies ice cream, although it depends on your local dairy. Some dairies make a fantastic product, so give them a shot too and “see what they got”.

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How to Set Up and Organize Your New Ice Cream Business

How to set up and organize your new business

When starting your new business you will need to decide if your business will be a sole proprietorship, a partnership or a corporation.  This should be one of the first decisions you make once you have decided to go into the ice cream business.  Some people are overwhelmed with the thought of making this decision.  Below are the definitions of each type of business and the pro’s and con’s of each type.  While we can explain your options if you want further advice on which way you should organize your business you may want to consult with an attorney or an accountant.

Sole proprietorship:  a business owned by one person or a married couple that files jointly.

Partnership:  a business owned by more than one person.

Corporation:  A business organized as a separate legal entity owned by stockholders.  You can have a corporation with as few as 1 or 2 people.

Most people choose the sole proprietorship form for their ice cream shop.  This is really the easiest option and probably simplifies things at tax time since most of the time you just fill out a business profit and loss form and you claim the shop income on your personal return.

Business license and Tax ID numbers

Once you have decided which type of business entity you are going to have you will have to set it up.  For a sole proprietorship you will need to file for a business license in the city you live.  At city hall there will be a department for business licenses.  Go there and fill out the pertinent information.  There will be a minimal charge to obtain this license.  You will also need to register the name of your business in the city and county so that no one else will use your name and you will not use a name that is already registered.  You will need to do the above for a partnership and a corporation as well.

All 3 forms of business will need the following numbers in order to sell products, charge taxes and file taxes.  You will need a tax id number. Your tax id number is also called an Employer Identification Number or EIN.  You can apply by phone at 1-800-829-4933 between 7am and 10pm or simply go to www.irs.gov .  Once online search for form SS-4.  When the search is complete click on the online application.  On the next screen scroll down and click on “apply online now”.  You can submit the form electronically or print and mail it in.  There is more information online if you need more help.  You must also check with your state regarding state and county sales tax id numbers.  To find out what forms to complete check with the Department of Revenue in your state.

FIRST STEPS

The most important decision you will make on the road to success is most likely to be the location you choose. You’ve probably already heard of the 3 most important factors involved in a successful retail operation: location, location, location. I cannot stress enough the importance of this, especially when it comes to ice cream.

Ice cream is an “impulse” product. In other words, people who buy ice cream usually do it on impulse when they see it and are tempted. It is less likely these days that people will make a conscious thought to go to an ice cream parlor. Sure, some still do, but many more sales are made to customers who happen to be brought to the area for another reason.

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