How to Start a Frozen Yogurt Shop
Frozen yogurt is a popular alternative to ice cream, and you find frozen yogurt shops in many malls and other shopping areas. If you are looking for a business to start, having your own shop could be an opportunity for you to make a living and be your own boss.
A frozen yogurt shop offers various yogurt treats with all kinds of flavors and toppings available. It may also offer a variety of beverage choices or other sweet snacks.
According to IBIS World, the frozen yogurt store industry size is $676.6 million in 2021 and is expected to grow 2.3% during the year. Over the last five years, it has declined 11.5% per year. According to Mordor Intelligence, the industry is expected to increase 3.4% per year through 2025.
The popularity of froyo has come from the fact that this treat is lower in fat and higher in protein than ice cream. Customer interest in healthier snacks has grabbed the attention of frozen yogurt franchises such as TCBY, PinkBerry, Yogurtland, Red Mango, making it difficult for independent shops to compete.
The frozen yogurt industry is being driven by consumers’ desire for healthy alternatives to other sweet treats, and yogurt is low-fat and high in protein. Since spending on desserts is considered discretionary, the industry is sensitive to economic fluctuations, decreasing during economic downturns.
Your target market will be those seeking frozen treats that are a healthy alternative to ice cream.
Skills, Experience, and Education Useful in Running a Frozen Yogurt Shop
There are several specific skills that you will need to open a frozen yogurt shop.
- Experience. Experience working in a frozen yogurt shop and is valuable, particularly in management.
- Business knowledge and experience. You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.
- People skills. You’ll need to be able to build rapport with your customers and listen to their comments to pick up on trends and new flavors to keep customers coming back.
Checklist for Starting a Frozen Yogurt Shop
If you’re thinking about starting a frozen yogurt shop, it’s important to do your research first. Here is a checklist to help you get started.
Step 1: Write your Business Plan
After coming up with the idea, the next step in starting your frozen yogurt stand should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, competitors, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing costs will be.
Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you to think through all the aspects of the business and then serves as a guide as you begin.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect frozen yogurt shop name can be challenging. Not only does the business name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.
Step 3: Form a Business Structure
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a frozen yogurt shop, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select your Location
Finding a location to purchase or lease that is conveniently located near areas with high traffic, such as strip malls or food courts is important to the yogurt shop’s success.
Some shops will be in their own space, while others will have a kiosk or cart. There is a big difference in cost, so be sure to run your numbers to make sure there are enough customers to support your stand.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
Dealing with food will typically require taking a class on food safety and licensing to handle food, which is typically administered by the local health department.
Additionally, general business licensing will be needed such as a state or local business license, sales tax permit, Employer Identification Number, and more.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing but getting the funding to start a frozen yogurt business is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total startup costs.
Step 7: Open a Business Bank Account
Keeping your business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
In many markets, there will be competition, so you need to offer high-quality products and good customer service with competitive prices.
Common marketing techniques for a frozen yogurt shop include social media marketing and online advertising. Also having a customer loyalty program will encourage repeat visits.
One important task while working on the marketing is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.
Step 9: Get Business Insurance
There are several types of insurance to consider before opening a frozen yogurt business. A couple of these include:
– General liability insurance can help protect you from third-party claims of bodily injury and property damage.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.
The cost to insure a frozen yogurt shop will vary on a number of factors. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
Step 10: Hire Employees
You may need employees to help you run your frozen yogurt shop. Make sure that you select people with appropriate experience and training.
In addition to labor costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your frozen yogurt business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a frozen yogurt shop?
Here are some of the typical costs you will face when you open a frozen yogurt shop.
– Initial deposit for shop lease, insurance, utilities, etc. $1,500 – $5,000
– Frozen yogurt machine $10,000 – $15,000
– Shop setup (refrigerator, freezer, work tables, cash register, initial ingredients, utensils, etc.) $5,000 – $15,000
– Initial marketing such as Facebook ads or search engine optimization for your website $500 -$1,000
How profitable is a frozen yogurt shop?
If your average sale per customer is $7.00 and you serve 50 customers per day, you could make $127,750 in revenue per year.
The main ingredients for froyo, primarily fresh fruit, milk, cream, etc., can vary in price, which will impact the profitability as well. If you plan to offer a toppings bar, that will need monitoring to minimize waste.
Looking for other specialty items like cakes, candy, smoothies, protein shakes, and other desert items can help boost profits.
When looking at profitability, be sure to consider seasonal fluctuations as yogurt sales tend to be higher in the summer months and lower in winter.
Are there grants to start a frozen yogurt shop?
It’s extremely rare to find a grant to start a frozen yogurt shop. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for a frozen yogurt shop?
The NAICS code for a frozen yogurt shop is 722213, which is classified under Snack and Nonalcoholic Beverage Bars.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
International Frozen Yogurt Association