By Randy Hallman | Richmond.com
When Derek Cha decided it was time to sell Sweet Frog, he wanted to find a new owner “who could take the business to another level.”
Cha didn’t have to look far for a buyer for his Midlothian-based chain of self-serve frozen yogurt stores: Patrick Galleher and his downtown-Richmond company, Boxwood Capital Partners, already held a minority interest in the chain.
For Galleher, one of Boxwood’s managing directors, the fro-yo company offered great prospects for growth.
The deal was done.
Now, just more than two months after purchasing controlling interest in the company, Galleher has Sweet Frog hopping like never before.
At a few stores the company is testing new products. Customers at some stores can opt for ice cream and/or smoothies in addition to the standard wide range of frozen yogurt flavors. Some stores offer bulk candy, also self-served from a bank of 48 bins.
Some stores have machines that make sugar-waffle cones (think aromatherapy) as an alternative to disposable cups. Some stores make breakfast-style waffles that customers can adorn with Sweet Frog yogurt and toppings.
The stores typically open midday. In the future, Galleher said, they might open earlier. “All these stores sit empty from 7 a.m. to noon,” he said.
What about lunch — sandwiches, hamburgers? Vance H. Spilman, Sweet Frog’s president, said a lunch menu would be an upheaval — not something the company is ready for. “We would have to think long and hard about that,” Spilman said. “We have to understand who we are and what we mean to the customer.”
One goal, Galleher said, is to find products that fit the company model of getting customers in and out quickly. Another consideration is to limit changes that could increase labor costs for franchisees.
The typical Sweet Frog is about 1,500 square feet, with two or three employees behind the counter.
Tom Lawrence, a franchise consultant based in western Henrico County, said the company’s cautious approach to change is prudent. Lawrence represents about 120 franchise chains, but not Sweet Frog.
“Everybody is aware of Sweet Frog’s success,” he said, “so they’re doing a lot of things right. But, quite often, the period after a change of ownership can be a crucial time. The new owners want to make changes. They need to consider the cost to the franchisees.”
For instance, Lawrence said, new products need to be tested not only at company-owned stores, but also at franchise locations.
“Try your new concepts in your top franchises,” he said, “and let those people become spokespeople for you.”
Franchisees can be wary of changes in procedure, too, he said. “Some of them may have chosen Sweet Frog because they don’t want to go to work at 7 a.m. They need to see what’s in it for them.”
Spilman said Sweet Frog’s strategy is in line with Lawrence’s advice: New products are being tested in company stores first, he said, “and we’ll roll out a bigger test that will include franchisees.
“We’ll want to test by region and by market, too,” he said.
Galleher also is pushing forward with plans to expand Sweet Frog’s footprint, something Cha envisioned for the company he founded. Sweet Frog has 350 stores in 29 states, England and the Dominican Republic. Soon, it will open stores in Egypt and the United Arab Emirates.
“And we are negotiating deals in Asia and South America,” Galleher said. “The opportunity for international expansion is huge.”
He said the company expects to add 30 stores this year and eventually to have 1,000 — a goal Cha had envisioned.