In Crowded Fro-Yo Pond, Sweet Frog Stands Out

Sweet frogs are swarming suburbia. For you city dwellers, Sweet Frog is a self-service frozen-yogurt franchise catering to families, a relatively underexploited niche in a category where more urban, upscale players are known for adult appeal. Sweet Frog has grown to 60 stores in just three years and plans to have at least 200 by year's end. If realized, that ambition would allow it to leapfrog the current self-serve leader, Yogurtland, with more than 145 shops. Privately held by South Korean immigrant and entrepreneur Derek Cha, Sweet Frog is also somewhat of an anomaly in the chain-restaurant category (save perhaps Chick-fil-A) in that it has a loose religious connection. The "frog" in its name does double duty as a mascot and an acronym for "Fully Rely On God," but other than the slogan's appearance on a T-shirt, the religious association isn't overly apparent in stores. Sweet Frog Sales and Development Director Raven Williams said the company would "never want anyone to feel unwelcome or uncomfortable in our stores due to a difference of belief." Its growth has been fairly miraculous considering Sweet Frog has no agency and has done very little marketing. It relies mainly on social media, using Facebook and Twitter both corporately and through its franchisees. It's wrapping a naming contest for two frog characters, choosing among 40,000 entries. The winners will be announced in a YouTube video and receive a $5,000 prize. But Mr. Cha has grander plans. A national advertising campaign is on the books. A potential TV show and an entertainment complex are in the concept phase. Tentatively dubbed Sweet Frog Land, it will be on the order of a Chuck E. Cheese or Dave and Buster's. The company also sells hats, T-shirts and plush toys of its frog mascots. While it does not disclose sales, Sweet Frog said its franchise fee is $30,000 per location. Franchisees pay a monthly fee of 6% of gross sales, of which 1% goes to marketing. "We really appeal to families, particularly those with children still in the home," said Ms. Williams. "We do very well in midmarket cities, where we're usually located close to movie theaters or Walmart or other big-box retailers." Value-per-ounce price ranges from 41¢ to 49¢, depending on the market -- is another key ingredient in the chain's success. Consumers dispense their own yogurt, with a typical store selection of 16 to 18 flavors (out of Sweet Frog's corporate master list of 60), and add their own toppings from a locally curated set of choices. One store, for instance, is next to a strawberry farm and they promote each other, Ms. Williams said. Sweet Frog isn't the only rising star in the self-serve fro-yo category. From Orange Leaf in the Midwest to Yogurtini in the Southwest and Yogurt Mountain in the Southeast, the competition is fierce. Its family-friendly concept plays well in the Middle American suburbs, providing a counterbalance to more metro-focused, sleek chains such as Pinkberry and Red Mango. Both of those are part of the rise of tart fro-yo dispensaries, with modern-palate-pleasing flavors such as green tea and pomegranate, which have challenged more-traditional shops such as TCBY. TCBY tops the $723 million fro-yo-store segment with an 18% market share but is followed closely by the new wave of hipsters. Pinkberry has a 16% market share; Red Mango, 14%; and Yogurtland, 8%, according to IBISWorld. No. 1 TCBY's market share has fallen from 34% in 2006, while No. 2 Pinkberry has risen from 9%. The emergence of the frozen-yogurt stores drove overall sales growth of 6% annually from 2006 to 2011, the researcher said. It estimated that continued, albeit smaller, annual growth of 2.5% will last through 2016. Self-service stores such as Sweet Frog are particularly on the rise, thanks to consumers' preference for controlling how much and what toppings they buy. Overall revenue from full-service stores accounts for 79% of sales, while self-service makes up the rest. But with the new wave of shops, there is also uncertainty that the category could suffer from the Starbucks syndrome. A Mintel research report in September said: "Will the market bear a place to get a $5 cup of fro-yo on every corner, like it did with coffee in the '90s? The next year or two will tell us whether this second wave of fro-yo will be as difficult to sustain as the first."

In Crowded Fro-Yo Pond, Sweet Frog Stands Out

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