Ice Cream Business Trends - Report Part 3

Ice Cream Franchise Success Rate 

The first point to highlight is the emergence of new brands in recent years.  Eight of the 18 franchises in our sample had started to offer franchises in the last four years.  This suggests that there are more ice cream franchises to answer the increasing demand for variety. 

The success rate is based on the number of openings and closures over a one-year period.  In our sample, 33% (6) of the franchise systems had a significant growth rate. These companies were new to the franchising concept (franchising for less than four years) while four were more mature concepts, established for over 15 years.  There were only 22% (4) systems in decline. The other franchise systems in our sample had a stable growth rate.

Adapting to a Changing Market – Trends

Ice cream franchises are constantly changing in response to changing trends and customer preferences.

The frozen yogurt craze

The health trend that had reached its peak in the mid ‘80s has returned.  Tart frozen yogurts have made a major come back, with many frozen yogurt franchises appearing on the frozen treat market.  The original product has had a make-over, with a focus now on the healthier aspects of the dessert.  These include lower levels of fat, pro-biotic properties and “healthy toppings” like fresh fruits and cereals.  New, fashionable flavors are now available, like green tea.  This guilt-free snack is gaining in popularity.  Yocream, a Portland-based frozen yogurt producer, has announced a 175% increase in its sales over a 12-month period.  Some are afraid that this trend will fade like it did in the mid ‘90s but the movement, endorsed by Hollywood stars like Ellen DeGeneres and the Jonas Brothers and is thriving¹.  Frozen yogurt franchise systems are growing quickly.  One, Céfiore, plans to open 50 units nationwide in 2009.

Green practice

Many industries are striving for greener policies these days and in doing so hope to boost their public image.  Surprisingly, the environmentally friendly trend has not yet penetrated the ice cream franchise industry.  The main name that comes to mind when thinking socially active policies is the Ben & Jerry’s franchise.  They are “activists”, not only buying Fair Trade, using sustainable products and changing their method of production, but are also donating the profits of certain flavors of ice creams to worthwhile causes. For example a portion of the proceeds for Phish Food ice cream goes toward environmental efforts in Vermont’s Lake Champlain Watershed. This could be a growing trend, especially when combined with the popularity of frozen yogurt, the customers for which might be more sensitive to these issues.

Co-branding

Co-branding is a strategy used to stimulate the growth of two franchise systems.  The brands involved mutually benefit from the combination of their resources.  Earlier in 2009, Coldstone Creamery and Tim Horton's tested about 50 locations of co-branded stores in the expectation that the evening traffic through Coldstone Creamery and the daytime traffic through Tim Horton's would stimulate further growth for both concepts².  The test locations have proven to be a success and the companies are expanding the co-branding system to more stores.  This is a good way of increasing sales and traffic in a franchise location.  Despite the high investment involved, it can deliver large returns if done correctly.

Outlook

By positioning the industry in the market as an affordable treat, and by adapting their outlets for family activity and entertainment, ice cream franchises have managed to boost sales. Many franchises have adapted their concept to create a family friendly ambience by introducing entertainment features, such as a singing hostess, child activities and larger seating areas.  Combining ice cream and entertainment increases the length of the visit and positively alters the customer experience.

The franchise systems in the ice cream industry are expanding, with some of the major players launching new express concepts that are more aggressive in their implantation strategies.  The appearance of new franchise concepts in the frozen dessert industry is a response to the increasing demand for value and variety, and the return of health trends like frozen yogurt. This is a period of great opportunity in the ice cream industry. Real estate prices have fallen significantly over the past two years, making prime retail locations more available and affordable.

The ice cream franchise industry is not short of challenges but when there is demand you will find growth. Historically, tougher economic conditions have proved favourable for ice cream stores. The ice cream industry, if not recession proof, seems to be recession resistant!

¹Maze, Jonathan, “The Second Yogurt War”, Franchise Times, June-July 2009, p. 27, 29.

²“Cold Stone expends co-branding with Tim Hortons”. Ice Cream Reporter v22 i3 pl(2), 20/02/2009
 

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