Competition Heats Up With Ice Cream Franchises

Whether it's high-fat super-premium gourmet ice cream with mix-in candy, fudge, or fruit, or just plain vanilla low-fat frozen yogurt, for most Americans it's not if or when, but how often they'll indulge in a sweet, tasty, frozen dessert or treat.

In the U.S. today, ice cream is a $20 billion-plus industry, with 90 percent market penetration. The industry is mature, meaning any gains from one competitor (Haagen-Dazs vs. Carvel) or segment (super premium vs. light) will be scooped from another.

Gourmet ice cream began in 1973 when Steve Herrell opened the now-legendary Steve's in Somerville, near Boston-that is, if you trust the New York Times, Washington Post, Travel & Leisure Magazine, and Carol T. Robbins and Herbert Wolff, authors of "The Very Best Ice Cream and Where to Find It."

Since then, scores of companies, large and small, have followed, with smoosh-ins, blend-ins, mix-ins, and more, from Ben & Jerry's, founded in Vermont in 1978, to Cold Stone Creamery founded in Arizona in 1991. Cold Stone has been one of the big winners latel

"They're trying to make ice cream more of a meal instead of just a dessert," says Steve Hockett, president of FranChoice. Marble Slab Creamery, founded in 1983 in Houston, is a similar concept, mixing frozen treats on a refrigerated stone surface. Marble Slab has 267 sites open and 154 under development in the U.S., Canada, and Puerto Rico.

"The super-premium ice cream segment of the market is what's really moving," says Jon Jameson, president and CEO of MaggieMoo's Ice Cream & Treatery. "What's happening in America today is that consumers are looking for quality. They're looking for a wonderful experience. I call this the 'experience economy.'" Jameson says people are willing to pay for that difference, and that the super-premium ice cream segment of the market will benefit most.

Oberweis Dairy, North Aurora, Ill., also has joined the fray at the high end, offering its super-premium ice cream through its Oberweis Franchise Systems. The company is hoping to add 500 franchises to its 33 Oberweis Ice Cream and Dairy Stores company stores by 2010.

Dippin' Dots Franchising, Inc., founded in 1988 and which began franchising in 2000, is another hot new concept, topping Franchise Times magazine's Fast 55 list, and ranking #2 in Entrepreneur magazine's Top 50 New Franchise Companies. Dippin' Dots are tiny beads of ice cream, yogurt, sherbet, and flavored ice, cryogenically frozen, and are served at movie theaters, theme parks, and other entertainment venues nationwide.

Dairy Queen, one of the best-known names in the frozen dessert segment, is celebrating the 20th anniversary of its Blizzard treat. DQ also offers its MooLatte drinks, made with coffee and soft-serve ice cream.

It should come as no surprise, then, to learn that U.S. consumers spend up to one-third of their food and beverage budget on products consumed for pure enjoyment, rather than nutritional value, according to a July 2005 report ("The Enjoyment Factor") from market research company Information Resources Inc. (IRI). Two highlights from the report:
- Taste outweighs health benefits for a large and growing proportion of consumers.
- Healthy eating is balanced with indulgence.

Health and Hedonism?
Today, in the battle between the consumer's sweet tooth and waistline, two frozen "food groups" are competing to satisfy consumers' two conflicting desires: 1) sweet, indulgent super-premium gourmet, and 2) light, health-conscious, low-fat, low-carb treats. Good news on this front: New manufacturing techniques already exist to maximize "mouth feel" at any fat level, allowing lovers of frozen treats to indulge their taste buds without jeopardizing either health or appearance.

As the low-carb, low-fat trend continues to spread. Ben & Jerry's announced in 2005 it was introducing a new line, Body and Soul, with 25 percent less fat, sugar, and calories than its regular offerings. Frozen yogurt is also making some healthy inroads in this segment, whether as ice cream substitute or healthy treat.

CoolBrands International, based in Markham, Ontario, covers the frozen dessert front. The company owns Yogen Früz (frozen yogurt), Swensen's Ice Cream, I Can't Believe It's Yogurt, and Bresler's Ice Cream & Yogurt, as well as Tropicana Smoothies, Juices & More.

Two Treats Better than One
While great as a standalone franchise, combining or co-branding an ice cream or frozen yogurt concept with other segments-whether healthy (fresh fruits, granola) or sinful/indulgent (Cinnabon, Mrs. Fields) or merely to get through the work day (Coolatta from Dunkin' Donuts)-is becoming an increasingly popular approach in the franchise industry.

Hockett sees big growth continuing for premium ice cream brands, especially if they co-brand. "When they can pair with brands or products that will bring people in during the mornings, it complements the treats very well, which are more of afternoon and evening purchase."

The idea, says Hockett, is to take the same amount of square footage, put in two brand names, two different day parts, and the same employees can serve both. Combining concepts not only sustains the ice cream and treat side, but also builds it by drawing in new customers. SweeTreats, based in Highlands, NC, started in 1989 as an ice cream/yogurt shop. Today, it is also a high-quality coffee shop.

Other examples: Dunkin' Donuts & Baskin-Robbins (both owned by Allied Domecq); TCBY merged with Mrs. Fields in 2000; and in 2001 Carvel was purchased by Roark Capital Group and is now part of Roark's Focus Brands. In late 2004 Focus bought Cinnabon and the international division of Seattle's Best Coffee. Prototype Carvel-Cinnabon units are in the works, and Carvel is opening units at a record pace.

Additional frozen treat-and-food pairings include Anderson's Frozen Custard and Roast Beef, Everything Yogurt and Salad Café; while others combine ice cream and yogurt (and more) under one roof, including All American Ice Cream and Frozen Yogurt, and Rita's Ices, Cones, Shakes & other Cool Stuff; and Gelato di Roma Creamery Pizza & Ice Cream Franchise.

Frozen custard is another lively portion of this segment, with franchise opportunities offered by such companies as Culver's Frozen Custard or Ritter's Frozen Custard.

Smoothies, too, can fall into the frozen treat category for health-conscious hedonists. Franchise brands making inroads include Maui Wowi Hawaiian Coffee & Smoothies, Smoothie Island, Smoothie King, and Planet Smoothie. And for something completely different, there's Little Jimmy's Italian Ice franchise.