Why Menchie’s frozen yogurt chain is expanding rapidly in Canada

The total cost of opening a Menchie’s is around $350,000 on average…Franchisees must provide one third of the capital to cover start-up fees while the rest is covered by a bank loan…16. mike ditto: People also lined up for Krispy Kreme for over a mile when it opened, today nobody wants it.

The Financial Post
April 29, 2013

Why Menchie’s frozen yogurt chain is expanding rapidly in Canada
Chris Riddell

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Menchie's Frozen Yogurt franchise co-owners, from left to right, Gabriel Chan, Boris Lee, and Jamie Lee. Darren Calabrese/National Post

When Boris Lee travelled to California in 2011 with his family and discovered Menchie’s frozen yogurt, he was inspired by the friendly atmosphere, self-serve format, and delicious frozen treats.

Returning to Toronto, he started researching franchise opportunities with two partners — his brother and a close friend. There are many frozen yogurt companies ranging from small independents to big chains, and Mr. Lee studied each of them to determine which was best. After careful deliberation the partners settled on Menchie’s. Recently, they opened a new store in Toronto at St. Clair and Bathurst in the ground floor of a new condo tower.

“Menchie’s is very well recognized and growing in Canada,” Mr. Lee said. “Now they’ve gone global with the franchise so there is incredible support. A lot of marketing initiatives are driven through Canada and the U.S. brand recognition is something we really look at in understanding what they offer.”

The total cost of opening a Menchie’s is around $350,000 on average. The franchise fee is $40,000 for one store, or $105,000 for three, which brings down the cost to $35,000 each. Franchisees must provide one third of the capital to cover start-up fees while the rest is covered by a bank loan. On top of the franchise fee, they pay at least $150,000 for lease hold improvements, $100,000 or more for equipment, and there are also inventory and training expenses.

Founded in California in May 2007, Menchie’s has quickly expanded around the world, now numbering 285 stores in 12 countries. Canada has 33 locations and another 30 are scheduled to open in the next 90 days. Ultimately, Menchie’s plans to operate 200 stores across Canada and 150 of those are already spoken for, said Micheal Shneer, master franchisor of Menchie’s Canada and president of Yogurtworld Franchising Corp.

Menchie’s is a high-growth franchise, and the speed with which it’s spreading across Canada is hard to ignore. It was one of the eight frozen yogurt franchises operating in Canada registered with the Canadian Franchise Association. Its success is due to a number of things, including its tremendous celebrity cache.

At Mr. Lee’s St. Clair West location there is a wall covered with photos of teen favourites Paris Hilton, Selena Gomez, Justin Beiber and many others chowing down on its frozen yogurt. A large part of Menchie’s customer base is in the younger crowd, so when they see their pop idols eating at Menchie’s, they may want to do the same.

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The total cost of opening a Menchie’s is around $350,000 on average. The franchise fee is $40,000 for one store, or $105,000 for three, which brings down the cost to $35,000 each. Darren Calabrese/National Post

But this may not be the biggest contributor to its rapid expansion. “Part of the Menchie’s experience is engaging with the local community,” Mr. Shneer said. “We do it through fundraising, Facebook, Twitter, and some of the more fun things we do.”

“We allow each individual store to make its own decision about who it wants to support. We try and make it a neighbourhood-based decision,” he said. He also points to the many national and provincial campaigns. “For instance, this year we’ll be doing a big one with muscular dystrophy in which all the stores will participate. We’re also doing one in May against bullying and that’s going to be an Ontario-based one. We’ve done countless ones with cancer [fundraisers], The United Way… there’s probably not a week that goes by where we’re not doing a fundraiser.”

These community efforts give Menchie’s some social capital and makes one of its franchises a welcome addition to a neighbourhood.

Mr. Lee has already made community donations and is thrilled with the positive response his Menchie’s store has received so far.

“We want to understand what’s out there first of all,” Mr. Lee said. “There are nurseries. There are non-profit organizations. There are schools. There are after school programs. It’s important for us to get that information and get involved with the community. It’s going to be hard to get involved with everyone, but we certainly want to make sure we have a lot of the organizations in the area.”

But owning a franchise business isn’t for everyone, even if it is the crowded frozen yogurt sector you are getting into. Fred Asta is co-owner of Nom Nom Yogurt, a new independent chain in Vaughan that will soon open its second store and has a third planned for fall 2013.

“We actually went to Menchie’s first and all the locations were sold out,” says Mr. Asta. “With the lack of assistance once we looked through their franchise and their format we said, ‘ya know what, we can do this on our own and we can do it better.’ ” The store is similar to Menchie’s but has different product offerings such as pizza cones, and cakes.

“Us little guys are going to catch up to them. We’re not going to let those American guys beat us!”

Comments

1. Save The Sharks
good grief, I'll buy some yogurt at Superstore instead

2. An Editrix
After one visit, I vowed never to return. It's too easy to wind up with a $10 yogourt. Also, the experience is kind of like Chuck E. Cheese - not a place for any sane person over the age of 12.

3. mike ditto
I tried it and it was ok, not worth the money though.

4. King Tut-tut
Good luck. The frozen yogout store in James Bay, Victoria just closed down. There was never a soul in it but the owners, sitting around and looking mournful.

5. JustGeorge
Doesn't taste very good and is expensive. I like my yogurt plain or with some fruit. Maybe that's why I don't particularly like the chain. You need to put a bunch of sweet toppings / candy on the yogurt to make it taste good - and of course that costs more and isn't particularly good for you (although I understand it can be a treat).

6. SmoovB
Call me when Pinkberry makes it east of Edmonton…

Every trip to NYC, gotta have me some Pinkberry!!

7. ve6
are you from a ghetto?

8. Michael
Love Menchies!!! you can have as much or little as you want. One opened in North Vancouver 3 months ago and i have been there at least a dozen times…fat free except for the toppings.

9. alphs22
Sorry to break it to you but it's not fat free.
P

10. ete
And loaded with sugar, which your body converts into fat.

11. nomnomnom
try nom nom's and see and taste the diffrence,we did and are kids loved it, the
banana yogurt is our favourite

12. Gross
So what if they have star pictures all over the place, who cares? this is why ppl r going? And by the way Yogurt is super bad for ppl … Duh ???

13. That Was Then
My kids love it. It has become the teen neighbourhood hangout in the very short time it has been open here. It's better than loitering out in front of 7/.11 with those huge slurpies.

14. Dan_The_Man
My son loves it probably because it's much sweeter than traditional frozen yoghourt. I prefer the plainer stuff.

15. Ndubb2
Was in Ottawa a couple of weeks ago when the Menchies franchise opened there. The people were lined up in the rain. It was an amazing thing to see. Just wait until the warm weather hits. That site in the market will be swamped.

16. mike ditto
people also lined up for Krispy Kreme for over a mile when it opened, today nobody wants it.

http://business.financialpost.com/2013/04/29/menchies-takes-a-big-bite-out-of-canadas-frozen-yogurt-market/


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Risks: Advertorial, Celebrity endorsement, Churning (serial reselling), Comments on article are interesting, Expands too quickly, Government guaranteed loans, Government guaranteed loans used a great deal in franchising, Government guaranteed loan program very attractive to fraud, Government guaranteed loans, massive loan defaults, Government guaranteed loans: program loses $1, franchisee families lose $10, Kleenex system: tradename born to die quickly, Krispy Kreme stock model in the making?, No franchisor support, Shills, Predatory franchise lending. Pump-and-dump scheme, System designed to fail for franchisees, When the franchisor tanks, so does the franchisee, Canada, 20120130429 Why menchies

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