12/04/08

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Fro-yo face-off

Yogo Monster opened in August at 115 Court Street in Brooklyn.

The frozen yogurt purveyors that came to the city a few years ago offering tart (rather than sweet) soft-serve are now on a new expansion tear.

The fro-yo trend began picking up steam when Pinkberry opened its first Manhattan store in late 2006; the company, which was started in Los Angeles in February 2005, was already hugely popular in its hometown. Pinkberry expanded quickly in New York — within a year, the chain had eight locations in the city.

Meanwhile, by early 2008, Pinkberry's main rival, Red Mango, had four locations in the city.

The newest trendy dessert retails for around $4 to $6 a serving. Now, in the last few months and even weeks, the expansion of these tart and tangy operations has reached new heights. There are now dozens of these Korean-style frozen yogurt stores in Manhattan and in the outer boroughs, particularly Queens and Brooklyn.

Even as the big players continue to widen their reach, a host of smaller competitors such as Yofiore, Yogo Monster, Oko, Cocoplum and 16 Handles have popped up around town. Yofiore, which has only been in existence for six months, now has six New York City stores in operation, while Yogo Monster opened a location in Park Slope this March and additional locations in Forest Hills and Downtown Brooklyn this summer.

Brokers said the companies that sell the new generation of treats are taking a bite out of the city's retail landscape. Also, there are more stores on the way, in locations that could create some fierce frozen yogurt competition.

On Bleecker Street, for example, the first Red Mango opened in late 2007, just a few doors down from Pinkberry. The competitors — which now have a combined 23 stores open or in the works in the city — also have stores within a stone's throw of each other in Union Square, on West 32nd Street and in Flushing. They'll be facing off again on St. Marks Place when Red Mango opens a location on the street this fall.

As a story headlined "Yogurt War!" recently pointed out in the Brooklyn Paper, within the coming months, Court Street in Downtown Brooklyn will become a mini-hub for frozen yogurt. In August, Yogo Monster opened at 115 Court Street. And last month, Yofiore opened at 32 Court and Red Mango is coming to 125 Court.

Owners of new-school frozen yogurt emporiums said their aggressive retail strategy in the city is being driven by demand, and they're optimistic about avoiding the same fate as frozen yogurt stores like Tasti D-Lite, I Can't Believe It's Yogurt and TCBY, which became hugely popular in the 1980s, but saw a contraction in sales and store growth over the course of the '90s. 

"We call it a super-food," said Spencer Chin, a partner in Yofiore, which is opening its seventh New York City location this month on Bedford Avenue in Williamsburg.

Yofiore, unlike Red Mango and Pinkberry, does not yet offer franchises. However, Chin said, the company is eyeing franchise deals, as well as planning an expansion outside of the city into Maryland and Virginia. 

"We agree that the most important thing in retail is location, location, location," said Chin, noting that all of Yofiore's stores are on high-traffic commercial streets, such as Roosevelt Avenue in Jackson Heights. "And we don't need humongous spaces."

Tim King, a principal of CPEX Real Estate, the firm that brokered the deal for Yofiore's location on Court Street, noted that while Yofiore paid top dollar for the space, "they very methodically studied their revenues" before signing a lease.

"Per square foot, it's a very high rent," said King, noting that the rent on Yofiore' s 625-square-foot store went for "close" to the asking price of $14,000 a month, "but the area they're in is such a dynamic marketplace."

The Brooklyn-based real estate Web site Brownstoner recently compared that $268 per-square-foot price to Massey Knakal's retail report from last year, which put rents on that stretch from $85 to $99 per square foot.

King contended that the marketplace can theoretically support multiple businesses selling the same products, pointing to overlaps in other types of businesses on Court Street.

"On Court, you've got a Duane Reade and then a block away, another Duane Reade," he said. "And then there are the lifestyle places. Within a few blocks, there are four gyms on Court Street. And yogurt is like gyms; it's part of a healthy lifestyle that people want to lead."


Frozen assets

According to Brandon Eisenman, a broker with Robert K. Futterman & Associates who helped Pinkberry secure its first 10 Manhattan locations, frozen yogurt stores are looking for certain specifications when scouting for locations.

"Yogurt businesses such as Pinkberry look for as wide a front as possible for visibility, usually a minimum of 15 feet, and the ability to showcase their highly recognizable storefront for brand identity," said Eisenman. "They look to target areas with high night and weekend traffic in markets around restaurants, schools, health clubs, etc. They target markets with demographics that are high in young females."

Many of the companies also try to make their spaces distinctively stylish. Pinkberry, for example, outfits stores with pricey chairs designed by Philippe Starck; Yofiore's Chin said his stores include light pink décor that "makes customers feel welcome and warm."

Veterans of the first wave of frozen yogurt popularity are taking cues from the young upstarts. TCBY is currently offering a tart flavor of yogurt in test markets that the company expects to roll out nationwide next month, according to Steve Willes, TCBY's director of marketing.

Willes said the company started remodeling and renovating all of its stores in 2007.

"We're targeting some select markets like New York City for growth and development," said Willes, who pointed out that TCBY expects to open between 10 and 20 new stores in the city over the next couple of years. "Some of the buzz and excitement that's been generated by our competitors has been good for us. This definitely feels familiar, though this time around there's more of a focus on the health benefits in the yogurt, like probiotics and live cultures."

Business projections may be healthy for both the old and new school, but no one is assuming New York can keep an endless number of frozen yogurt stores afloat. 

"The sky is not the limit," said CPEX's King. "The operators that chose the best locations are not just going to survive, but flourish and grow. People who just put a dot on the map, though, they may not survive."

Other retail specialists are also wary of the expansion and said the saturation point will eventually be reached.

"I think it's optimistic to say they're the new banks," said Andrew Monger, the president and CEO of Branded Concept Development, a restaurant and retail development firm that helped Red Mango find some of its first New York locations. "Banks generally have a lot of money. They can afford expensive real estate. Frozen yogurt is a trend. In any cold-weather climate there's going to be a reality check in a year or two."

Monger, whose firm is currently engaged in a lawsuit with Red Mango because of a disagreement over how many store locations his firm exclusively secured for the chain, said that frozen yogurt businesses generally look for spaces from 600 to 1,500 square feet and that "most are sensible and not paying top dollar" for storefronts.

"Even paying the prices they're paying, they still have some economics to work out," said Monger. "I think it's a real challenge, especially given New York's climate and real estate prices. We've been through this before, with yogurt companies trying to position themselves as different from ice cream. But by and large, people are still just going to consider it a frozen dessert." 

Not surprisingly, frozen yogurt business owners are a bit more optimistic about their staying power.

"We firmly believe our concept and value proposition will have long-term sustainability," said Daniel Kim, the founder, president and CEO of Red Mango. "Every trend has an opportunity to become a part of people's lifestyles, as long as the factors driving those trends are naturally a part of things people will desire and demand over time."